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 $7.33 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight-line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. $15 Current (no Proposed automation) (automation) 76,000 units 110,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $15 Direct labor 25 ? Variable manufacturing 8 8 overhead Total variable 48 ? manufacturing costs Contribution margin $42 ? $ 47 ? $ $ Fixed manufacturing costs 1, 140,000 2,250,000 Net operating income ? ? PA11-2 Part 3 3. Determine the project's payback period. (Round your answer to 2 decimal places.) X Answer is not complete. Payback years period 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 $7.33 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight-line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no Proposed automation) (automation) 76,000 units 110,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $15 $15 Direct labor 25 ? Variable manufacturing overhead 8 8 Total variable 48 ? manufacturing costs Contribution margin $42 ? $ 47 ? $ $ Fixed manufacturing costs 1, 140,000 2,250,000 Net operating income ? ? PA11-2 Part 4 4. Using a discount rate of 15 percent, calculate the net present value (NPV) of the proposed investment. (Future Value of $1, Present Value of $1, Future 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.) Net present value $ 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 $7.33 million, and the equipment has a useful life of 6 years with a residual value of $1,150,000. The company will use straight-line depreciation. Beacon could expect a production increase of 34,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no Proposed automation) (automation) 76,000 units 110,000 units Production and sales Per Per volume Unit Total Unit Total Sales revenue $90 $ ? $90 $ ? Variable costs Direct materials $15 $ 15 Direct labor 25 ? Variable manufacturing 8 8 overhead Total variable 48 ? manufacturing costs Contribution margin $42 ? $ 47 ? $ Fixed manufacturing costs 1,140,000 2,250,000 Net operating income ? ? PA11-2 Part 5 5. Recalculate the NPV using a 10 percent discount rate. (Future Value of $1, Present Value of $1, Future 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.) Net present value