Question
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.27 million, and the equipment has a useful life of
Beacon Company is considering automating its production facility. The initial investment in automation would be $9.27 million, and the equipment has a useful life of 7 years with a residual value of $1,010,000. The company will use straight-line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit.
1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.)
| Current (no automation) | Proposed (automation) | ||||||||
| 90,000 units | 126,000 units | ||||||||
| Production and sales volume | Per Unit | Total | Per Unit | Total | |||||
| Sales revenue | $ | 93 | $ ? | $ | 93 | $ ? | |||
| Variable costs | |||||||||
| Direct materials | $ | 20 | $ | 20 | |||||
| Direct labor | 20 | ? | |||||||
| Variable manufacturing overhead | 12 | 12 | |||||||
| Total variable manufacturing costs | 52 | ? | |||||||
| Contribution margin | $ | 41 | ? | $ | 45 | ? | |||
| Fixed manufacturing costs | $ 1,150,000 | $ 2,330,000 | |||||||
| Net operating income | ? | ? | |||||||
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College Accounting Chapters 1 24
Authors: Douglas J. Mcquaig, Patricia Bille, Tracie L. Nobles
10th Edition
1439037752, 9781439037751
