[The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $6.97 million, and the equipment has a useful life of 5 years with a residual value of $1,170,000. The company will use straight-line depreciation. Beacon could expect a production increase of 30,000 units per year and a reduction of 20 percent in the labor cost per unit.

PA11-2 Making Automation Decision [LO 11-1, 11-2, 11-3, 11-5] The fowowing information applies to the questions displayed below Beacon Company is considering automating its production facility. The initiel investment in automation would be $6.97 million, and the equipment has a useful life of 5 years with a residual value of $1170,000. The company will use straight-line depreciation Beacon could expect a production increase of 30,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no autometion) Proposed (eutomation) Production and sales volume 71,000 units 101,000 units Per Unit $ 99 Per Unit $ 99 Total Total Seles revenue Verieble costs Drect materials Drect labor eriable menufecturing averheed $ 16 20 10 46 $ 53 5 16 10 $ 57 Total variable manufacturing costs Contibution margin Fioxed manufecturing costs $2180000 Net operating income