Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 32,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income PA11-2 Part 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 45 46 $ 52 Total $ ? 1,200,000 ? Per Unit $ 98 $ 17 ? 9 ? $ 56 Total 2,310,000 ?
Beacon Company is considering automating its production facility. The initial investment in automation would be $8.42 million, and the equipment has a useful life of 7 years with a residual value of $1,140,000. The company will use straight- line depreciation. Beacon could expect a production increase of 32,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income PA11-2 Part 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places Current (no automation) 72,000 Proposed (automation) 104,000 units units Per Unit $ 98 $ 17 20 9 45 46 $ 52 Total $ ? 1,200,000 ? Per Unit $ 98 $ 17 ? 9 ? $ 56 Total 2,310,000 ?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 10E: Roberts Company is considering an investment in equipment that is capable of producing more...
Related questions
Question
unc.4
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps with 3 images
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning