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Required information [The following information applies to the questions displayed below.] Beacon Company...

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Accounting

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 $6.41 million, and the equipment has a useful life of 5 years with a residual value of $1,160,000. The company will use straight-line depreciation. Beacon could expect a production increase of 48,000 units per year and a reduction of 20 percent in the labor cost per unit.

Current (no automation) Proposed (automation)
73,000 units 121,000 units
Production and sales volume Per Unit Total Per Unit Total
Sales revenue $ 92 $ ? $ 92 $ ?
Variable costs
Direct materials $ 18 $ 18
Direct labor 20 ?
Variable manufacturing overhead 10 10
Total variable manufacturing costs 48 ?
Contribution margin $ 44 ? $ 48 ?
Fixed manufacturing costs $ 1,170,000 $ 2,280,000
Net operating income ? ?

Required: 1-a. Complete the following table showing the totals. (Enter your answers in whole dollars, not in millions.)

1-b. Does Beacon Company favor automation?

  • Yes

  • No

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