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Beacon Company is considering automating its production facility. The initial investment in automation would be $$8\mathrm{.}78$ million, and the equipment has a useful life of $7$ years with a residual value of $$1,080,000.$ The company will use straight$-$line depreciation. Beacon could expect a production increase of $48,000$ units per year and a reduction of $20$ percent in the labor cost per unit.

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

$71,000$ units $119,000$ units

Production and sales volume Per Unit Total Per Unit Total

Sales revenue $ $92$ $ $?$ $ $92$ $ $?$

Variable costs

Direct materials $ $15$ $ $15$

Direct labor $25?$

Variable manufacturing overhead $1111$

Total variable manufacturing costs $51?$

Contribution margin $ $41?$ $ $46?$

Fixed manufacturing costs $ $1,090,000$ $ $2,350,000$

Net operating income $??$

Required:

$1-$a$.$ Complete the following table showing the totals. $($Enter your answers in whole dollars, not in millions.$)$

$1-$b$.$ Does Beacon Company favor automation?

multiple choice

Yes

No