[The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $10.76 million, and the equipment has a useful life of 8 years with a residual value of $1,160,000. 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) 89,000 units 122,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $100 $2 $100 $7 Variable costs Direct materials $ 20 $20 Direct labor 25 2 Contribution margin Net operating income Variable manufacturing overhead Total variable manufacturing costs Fixed manufacturing costs 9 9 54 7 $ 46 2 $ 1,180,000 $ 51 7 $2,190,000 7 Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.) Current (no automation) 89,000 units Production and Sales Volume Per Unit Total Sales revenue $ 100 $ Variable costs Proposed (automation) 122,000 units Per Unit Total 100
[The following information applies to the questions displayed below.] Beacon Company is considering automating its production facility. The initial investment in automation would be $10.76 million, and the equipment has a useful life of 8 years with a residual value of $1,160,000. 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) 89,000 units 122,000 units Per Per Production and sales volume Unit Total Unit Total Sales revenue $100 $2 $100 $7 Variable costs Direct materials $ 20 $20 Direct labor 25 2 Contribution margin Net operating income Variable manufacturing overhead Total variable manufacturing costs Fixed manufacturing costs 9 9 54 7 $ 46 2 $ 1,180,000 $ 51 7 $2,190,000 7 Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.) Current (no automation) 89,000 units Production and Sales Volume Per Unit Total Sales revenue $ 100 $ Variable costs Proposed (automation) 122,000 units Per Unit Total 100
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...
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