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Beacon Company is considering automating its production facility. The initial investment in...

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Accounting

Beacon Company is considering automating its production facility. The initial investment in automation would be $9.23 million, and the equipment has a useful life of 8 years with a residual value of $1,070,000. The company will use straight-line depreciation. Beacon could expect a production increase of 40,000 units per year and a reduction of 20 percent in the labor cost per unit.
Production and sales volume Current (no automation)80,000 units Proposed (automation)120,000 units
Per Unit Total Per Unit Total
Sales revenue $ 91 $ ? $ 91 $ ?
Variable costs
Direct materials $ 17 $ 17
Direct labor 30?
Variable manufacturing overhead 99
Total variable manufacturing costs 56?
Contribution margin $ 35? $ 41?
Fixed manufacturing costs 1,140,0002,260,000
Net operating income ??
Required:
3. Determine the project's payback period.

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