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Beacon Company is considering automating its production facility. The initial investment in automation would be $11.32 million, and the equipment has a useful life of
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.32 million, and the equipment has a useful life of 9 years with a residual value of $1,150,000. The company will use straight- line depreciation. Beacon could expect a production increase of 47.000 units per year and a reduction of 20 percent in the labor cost per unit Current (no automation 77.000 units PET Total $ 98 Proposed (automation) 124,000 units Per Unit Total $ 98 S ? Unit Production and sales volume Sales revenue Variable costs $ 17 $ 17 Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income 5 51 1,090,000 $ 2,350,000 Required: 1-a. Complete the following table showing the totals (Enter your answers in whole dollars, not in millions.) Current (no automation) 77,000 units Per Unit T otal Proposed (automation) 124,000 units Per Unit Total Production and Sales Volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 1,090.000 $ 2,350,000
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