[The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $10.37 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight-line depreciation. Beacon could expect a production increase of 33,000 units per year and a reduction of 20 percent in the labor cost per unit.

	Current (no automation)			Proposed (automation)
Production and sales volume	80,000 units			113,000 units
	Per Unit		Total	Per Unit		Total
Sales revenue	$	90	?	$	90	?
Variable costs
Direct materials	$	16		$	16
Direct labor		25			?
Variable manufacturing overhead		11			11
Total variable manufacturing costs		52			?
Contribution margin	$	38	?	$	43	?
Fixed manufacturing costs			$ 1,240,000			$ 2,240,000
Net operating income			?			?

2.

value: 2.00 points

Required information

Required: 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.) 1-b. Does Beacon Company favor automation?

	Yes
	No

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3.

value: 2.00 points

Required information

2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)

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eBook & Resources

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4.

value: 2.00 points

Required information

3. Determine the project's payback period. (Round your answer to 2 decimal places.)

References

eBook & Resources

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5.

value: 2.00 points

Required information

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 dollar. Round the final answer to nearest whole dollars.)

Required Information Beacon Company is considering automating its production facility. The initial investment in automation would be $10.37 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use straight-line depreciation. Beacon could expect a production increase of 33,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 80,000 units Proposed (automation) Production and sales volume 113,000 units Per Unit $90 Per Unit $90 Total Total Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead $ 16 $ 16 25 Total variable manufacturing costs Contribution margin Fixed manufacturing costs 52 $ 38 $ 43 $1,240,000 $2,240,000 Net operating income Questions 2 -6 (of 6) Save & ExitSubmit The following information applies to the questions displayed below Beacon Company is considering automating its production facility. The initial investment in automation would be $10.37 million, and the equipment has a useful life of 9 years with a residual value of $1,100,000. The company will use streight-line depreciation. Beacon could expect a production increase of 33,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no eutomation) Proposed (automation) Production and sales volume 80,000 units 113,000 units Per Unit S 90 Per Unit $90 Total Total Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead 25 Total variable manufacturing costs Contribution margin Fixed manufacturing costs S 38 $ 43 $2,240,000 Net operating income value 2.00 points Required information Required 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.) Current (no a ion and Sales Volume $80,000 Units 113,000 Units Per Unit Per Unit Total Total Sales Revenue 90 90 Variable Costs: Required information 2.00 points 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.) Current (no a 80,000 Units Per Unit 113,000 Units Per Unit Production and Sales Volume Total Total Sales Revenue 90 90 Variable Costs: Direct Materials S 16 25 $ 16 Direct Labor Variable Manufacturing Overhead Total Variable Manufacturing Costs Contribution Margin Fixed Manufacturing Costs Net Operating Income 52 38 43 S 1,240,000 2,240,000 1-b. Does Beacon Company favor automation? Yes No 2. Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Rate of Return References eBook & Resources Worksheet Learning Objective: 11-01 Calculate the accounting rate of return and describe its major weaknesses. Learning Objective: 11-03 Calculate net present value and describe why it is superior to the other capital budgeting techniques. Difficulty: 3 Hard Learning Objective: 11-02 Calculate the payback period and describe its major weaknesses. Learning Objective: 11-05 Use the net present value method to analyze mutually exclusive capital investments. 4. Required information 2.00 points 3. Determine the project's payback period. (Round your answer to 2 decimal places.) back Period years 4. Using a discount rate of 15 percent, calculate the net present value (NPV) of the proposed investment. (Future Value of S1, Present Value of S1, Future Value Annuity of $1. Present Value Annuity of S1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollar. Round the final answer to nearest whole dollars.) Present Value ReferenceseBook & Resources Learning Objective: 11-01 Calculate the accounting rate of return and describe its major weaknesses. Learning Objective: 11-03 Calculate net present value and describe why it is superior to the other capital budgeting techniques. Worksheet Difficulty: 3 Hard Learning Objective: 11-02 Calculate the payback period and describe its major weaknesses. Learning Objective: 11-05 Use he net present value method to analyze mutually exclusive capital investments. Check my work Required information 2.00 points 5. Recalculate the NPV using a 10% discount rate. Future a eo 1. Presen alueo 1. Eu ureValueAnni yor L Presen value nnu i 1 Negative amount should be indicated by a minus sign. Enter the answer in whole dollar. Round the final answer to nearest whole dollars.) Use appropriate factor s from the tables provided. Present Value