Required information [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. Production and sales volume Current (no automation) 80,000 units Per Total Unit $ 90 2 Proposed (automation) 120,000 units Per Total Unit $ 90 2 Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing conta Contribution margin Yixed manufacturing costs Net operating income $ 18 25 10 5) $ 37 $18 2 10 ? $.42 2 $ 1,250,000 2 $ 2,350,000 2 2. Determine the project's accounting rate of return (Round your answer to 2 decimal places.) Accounting Roto of Rotum % 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. Production and sales volume Current (no automation) 80,000 units Per Unit Total Proposed (automation 120,000 units Per Total Unit $ 90 $90 Sales revenue Variable costs Direct materials Direct lobor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Pixed manufacturing costs Net operating income $ 18 25 10 53 $32 $18 2 10 ? $ 42 5.1.250.000 $ 2,350,000 Required: 1-a. Complete the following table showing the totals. (Enter alt answers in whole dollars.) Production and Sales Volume Answer is complete and correct. Current (no Proposed automation) (automation) 80,000 Units 120.000 Units Por Total Por Unit Total Unit s 90 $ 90 7.200.000 10,800,000 S $ 18 Sales Revenue Variable Costs Direct Materials Direct Labor Variable Manufacturing Overhead Total Variable Manufacturing Costs Contribution Marcin 18 25 20 10 10 53 48 $ 37 2.960.000ls 42 5.040.000 Required: 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.) Production and Sales Volume Answer is complete and correct. Current (no Proposed automation) (automation) 80,000 Units 120,000 Units Per Total Per Total Unit Unit $ 90 $ 90 7,200,000 10,800,000 $ $ 18 S 18 25 20 Sales Revenue Variable Costs: Direct Materials Direct Labor Variable Manufacturing Overhead Total Variable Manufacturing Costs Contribution Margin Fixed Manufacturing Costs Net Operating Income 10 10 53 48 $ 37 $ 42 2,960,000 1,250,000 IS 1,710,000 5,040,000 2,350,000 $ 2,690,000 1-b. Does Beacon Company favor automation? Yes No Required information [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 Production and sales volume Current (no automation) 80,000 units Per Total Unit $ 90 ? Proposed (automation) 120,000 units Per Total Unit $ 90 ? Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 18 25 10 53 $ 37 $ 18 2 10 2 7 $ 42 $1,250,000 7 2 $ 2,350,000 2 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting Rate of Rotum 1% Required information [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. Production and sales volume Current (no automation) 80,000 units Per Total Unit $ 90 2 Proposed (automation) 120,000 units Per Total Unit $.90 ? $ 18 25 10 Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income $ 18 2 10 2 $ 42 53 $ 37 2 $1,250,000 2 $ 2,350,000 ? 3. Determine the project's payback period (Round your answer to 2 decimal places.) Answer is complete and correct. Payback Period 6.17 years Required information [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 Production and sales volume Current (no automation) 80,000 units Per Unit Total $ 90 7 Proponed (automation) 120,000 units Per Total Unit 590 2 Sales revenue Variable costs Direct materiala Direct labor Variable manufacturing overhead Total variable manufacturing coats Contribution margin Pixed manufacturing costs Net operating income $10 25 10 53 $37 $10 ? 10 2 $.42 $1,250,000 $ 2,350,000 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 [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 Production and sales volume Current (no automation) 80,000 units Per Total Unit $ 90 2 Proposed (automation) 120,000 units Per Total Unit $.90 2 Sales revenu Variable conta Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Het operating income $ 18 25 10 53 537 $ 18 7 10 2 $ 42 $ 1,250,000 2 $ 2,350,000 7 5. Recalculate the NPV using a 10% discount rate (Future Value of $1. Present Value of $1. Future Value Annuity of S1. Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Enter the answer in whole dollars.) Net Present Value
