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 $11.31 million, and the equipment has a useful life of 9 years with a residual value of $1,140,000. The company will use straight-line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and Sales revenue Variable costs volume Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 77,000 units Per Unit $93 $15 25 9 49 $44 Total $ ? ? $ 1,130,000 ? Proposed (automation) 113,000 units Per Unit $93 $15 ? 9 ? $ 49 Total $ ? ? $ 2,150,000 ?

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 $11.31 million, and the equipment has a useful life of 9 years with a residual value of $1,140,000. The company will use straight-line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and Sales revenue Variable costs volume Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Current (no automation) 77,000 units Per Unit $93 $15 25 9 49 $44 Total $ ? ? $ 1,130,000 ? Proposed (automation) 113,000 units Per Unit $93 $15 ? 9 ? $ 49 Total $ ? ? $ 2,150,000 ?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 8P

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