Required information PA11-2 (Static) 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 $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. Current (no automation) Proposed (automation) 80,000 units 120,000 units Production and sales volume Per Unit Total Per Unit Total Sales revenue $ 90 $ ? $ 90 $ ? Variable costs Direct materials $ 18 $ 18 Direct labor 25 ? Variable manufacturing overhead 10 10 Total variable manufacturing costs 53 ? Contribution margin $ 37 ? $ 42 ? Fixed manufacturing costs $ 1,250,000 $ 2,350,000 Net operating income ? ?

Required: 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.)

1-b. Does Beacon Company favor automation?

multiple choice

• Yes

• No