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Beacon Company is considering automating its production facility. The initial investment in automation would be $ million, and the equipment has a useful life of years with a residual value of $ The company will use straightline depreciation. Beacon could expect a production increase of units per year and a reduction of percent in the labor cost per unit.
Current no automation Proposed automation
units units
Production and sales volume Per Unit Total Per Unit Total
Sales revenue $ $ $ $
Variable costs
Direct materials $ $
Direct labor
Variable manufacturing overhead
Total variable manufacturing costs
Contribution margin $ $
Fixed manufacturing costs $ $
Net operating income
Required:
a Complete the following table showing the totals. Enter your answers in whole dollars, not in millions.
b Does Beacon Company favor automation?
multiple choice
Yes
No
