Required information

PA$11-2($Algo$)$ Making Automation Decision $[$LO $11-1,11-2,11-3,11-5]$

Skip to question

$[$The following information applies to the questions displayed below.$]$

Beacon Company is considering automating its production facility. The initial investment in automation would be $$11\mathrm{.}09$ million, and the equipment has a useful life of $9$ years with a residual value of $$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.

Current $($no automation$)$ Proposed $($automation$)$

$87,000$ units $123,000$ units

Production and sales volume Per Unit Total Per Unit Total

Sales revenue $ $95$ $ $?$ $ $95$ $ $?$

Variable costs

Direct materials $ $19$ $ $19$

Direct labor $25?$

Variable manufacturing overhead $1212$

Total variable manufacturing costs $56?$

Contribution margin $ $39?$ $ $44?$

Fixed manufacturing costs $ $1,250,000$ $ $2,180,000$

Net operating income $??$

PA$11-2$ Part $2$

$2.$ Determine the project's accounting rate of return. $($Round your answer to $2$ decimal places.$)$