Beacon Company Is considering automating its production facility. The Intlal Investment in automation would be...
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Beacon Company Is considering automating its production facility. The Intlal Investment in automation would be $15 million, and the equlpment has a useful life of 10 years with a residual value of $500,000. The company will use stralght-line depreclation. Beacon could expect a production Increase of 40,000 units per year and a reduction of 20 percent In the labor cost per unit. Current (no automation) Be, 000 units Per Unit $ 90 Proposed (automation) 120,e00 units Production and sales volume Per Total Total Unit $ 90 Sales revenue Variable costs $ 18 $ 18 Direct materials Direct labor 25 Variable manufacturing overhead Total variable manufacturing costs Contribution nargin Fixed manufacturing costs 10 10 53 $ 37 $ 42 $ 1,25e,eee $ 2,350,800 Net operating income Required: 1-a. Complete the following table showing the totals. (Enter all answers in whole dollars.) Current (no automation) Proposed (automation) Production and Sales Volume 80,000 Units 120,000 Units Per Unit Total Per Unit Total Sales Revenue 06 08 Variable Costs: Direct Materials 18 18 Direct Labor 25 10 10 Variable Manufacturing Overhead 53 Total Variable Manufacturing Costs Contribution Margin 42 37 Fixed Manufacturing Costs 1,250,000 2,350,000 Net Operating Income
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