Beacon Company is considering automating its production facility. The initial investment in automation would be $7.42...
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Beacon Company is considering automating its production facility. The initial investment in automation would be $7.42 million, and the equipment has a useful life of 6 years with a residual value of $1,000,000. The company will use straight- line depreciation. Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs) Contribution margin Fixed manufacturing costs Net operating income PA11-2 Part 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places. Current (no automation) 89,000 units Proposed (automation) 126,000 units Per Unit $.98 Total $2 Per Unit $ 98 Total 57 $20 $ 20 20 2 11 11 51 2 $47 2 5:51 1,090,000 7 2,240,000 2,240,000 Beacon Company is considering automating its production facility. The initial investment in automation would be $7.42 million, and the equipment has a useful life of 6 years with a residual value of $1,000,000. The company will use straight- line depreciation. Beacon could expect a production increase of 37,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct materials Direct labor Variable manufacturing overhead Total variable manufacturing costs) Contribution margin Fixed manufacturing costs Net operating income PA11-2 Part 2 Required: 2. Determine the project's accounting rate of return. Note: Round your answer to 2 decimal places. Current (no automation) 89,000 units Proposed (automation) 126,000 units Per Unit $.98 Total $2 Per Unit $ 98 Total 57 $20 $ 20 20 2 11 11 51 2 $47 2 5:51 1,090,000 7 2,240,000 2,240,000
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Related Book For
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
Posted Date:
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