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Beacon Company is considering automating its production facility. The initial investment in automation would be $15 million, and the equipment has a useful life
Beacon Company is considering automating its production facility. The initial investment in automation would be $15 million, and the equipment has a useful life of 10 years with a residual value of $500,000. The company will use straight- line depreciation. Beacon could expect a production increase of 40,000 units per year and a reduction of 20 percent in the labor cost per unit. 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 PA11-2 Part 1 Required: 1-a. Complete the following table showing the totals. 1-b. Does Beacon Company favor automation? Current (no automation) 80,000 units Proposed (automation) 120,000 units Per Unit $ 90 Total $ ? Per Unit Total $ 90 $ ? $ 18 $ 18 25 ? 10 10 53 ? $ 37 ? $ 42 1,250,000 ? ? 2,350,000 ?
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