Beacon Company is considering automating its production facility. The initial investment in automation would be $8.96 million, and the equipment has a useful life of 7 years with a residual value of $1,050,000. The company will use straight-line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent in the labor cost per unit.

The following information applies to the questions displayed below] Beacon Company is considering automating its production facility. The initial investment in automation would be $8.96 million, and the equipment has a useful life of 7 years with a residual value of $1,050,000. The company will use straight-line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 86,000 Units Proposed (automation) 129,000 Units Production and sales volume Total Per Unit $ 94 Total Per Unit $ 94 Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead $ 17 25 Total variable manufacturing costs Contribution margin Fixed manufacturing costs 53 $ 41 $ 46 1150,000 2,210,000 Net Operating income