Required information PA11-2 (Algo) Making Automation Decision (LO 11-1, 11-2, 11-3, 11-5) (The following information applies to the questions displayed below) Beacon Company is considering automating its production facility. The initial investment in automation would be $6.51 million, and the equipment has a useful life of 5 years with a residual value of $1,110,000. The company will use straight line depreciation. Beacon could expect a production increase of 37000 units per year and a reduction of 20 percent in the labor cost per unit Current (no automation) 85,000 units Proposed (automation) 122,000 units Per Unit Total Per Total Unit $93 $ 16 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 $ 16 15 10 41 $ 52 10 $55 $ 1,660, $ 2,280,000 PA11-2 Part 2 2. Determine the project's accounting rate of return (Round your answer to 2 decimal places.) Accounting rate of reum ! Required information PA11-2 (Algo) Making Automation Decision (LO 11-1, 11-2, 11-3, 11-5) [The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $6.51 million, and the equipment has a useful life of 5 years with a residual value of $1,110,000. The company will use straight- line depreciation Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit Current (no automation) 85,000 units Per Unit $ 93 $? Proposed (automation) 122,000 units Per Unit Total $93 $? 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 $ 16 15 10 5 16 ? 10 $ 52 > $ 55 $ 1,060,000 $ 2,200,000 PA11-2 Part 3 3. Determine the project's payback period. (Round your answer to 2 decimal places.) Payback period years Required information PA11-2 (Algo) Making Automation Decision (LO 11-1, 11-2, 11-3, 11-5) (The following information applies to the questions displayed below.) Beacon Company is considering automating its production facility. The initial investment in automation would be $6.51 million, and the equipment has a useful life of 5 years with a residual value of $1,110,000. The company will use straight line depreciation Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 85,000 units Per Unit Total $93 $? Proposed (automation) 122,000 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 $ 16 15 10 $ 16 2 10 $ 52 ? $ 1.060,000 2 5 2,280,000 > PA11-2 Part 4 4. Using a discount rate of 13 percent calculate the net present value (NPV) of the proposed investment. (Euture Value of $1. Present Value of $1. Euture Value Annully of 51. Present Value Annuity S1) (Use appropriate foctor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Nel pont de Required information PA11-2 (Algo) Making Automation Decision (LO 11-1, 11-2, 11-3, 11-5) [The following information applies to the questions displayed below) Beacon Company is considering automating its production facility. The initial investment in automation would be $6.51 million, and the equipment has a useful life of 5 years with a residual value of $1,110,000. The company will use straight- line depreciation. Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 85,eee units Per Unit Total $93 $? Proposed (automation) 122,000 units Per Unit Total $93 $? 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 $ 16 15 10 41 $ 52 $ 16 ? 10 ? $ 55 $ 1,060,000 $ 2,280,000 PA11-2 Part 5 5. Recalculate the NPV using a 8 percent discount rate (Future Value of $1. Present Value of $1. Euture Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.) Nel present value
