Beacon Company is considering automating its production facility. The initial investment in automation would be $7.17...
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Beacon Company is considering automating its production facility. The initial investment in automation would be $7.17 million, and the equipment has a useful life of 6 years with a residual value of $1,110,000. The company will use straight-line depreciation. Beacon could expect a production increase of 42,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 73,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Unit Total $ ? Total Sales revenue $ 95 $ ? $ 95 Variable costs Direct materials $ 16 $ 16 Direct labor 15 Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs 9. 40 $ 55 $ 58 $ 1,140,000 $ 2,270,000 Net operating income .Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting rate of return 21.27 % Beacon Company is considering automating its production facility. The initial investment in automation would be $7.17 million, and the equipment has a useful life of 6 years with a residual value of $1,110,000. The company will use straight-line depreciation. Beacon could expect a production increase of 42,000 units per year and a reduction of 20 percent in the labor cost per unit. Current (no automation) 73,000 units Proposed (automation) 115,000 units Per Per Production and sales volume Unit Unit Total $ ? Total Sales revenue $ 95 $ ? $ 95 Variable costs Direct materials $ 16 $ 16 Direct labor 15 Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs 9. 40 $ 55 $ 58 $ 1,140,000 $ 2,270,000 Net operating income .Determine the project's accounting rate of return. (Round your answer to 2 decimal places.) Accounting rate of return 21.27 %
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Answer Current No Automation Proposed Automation 73000 Units A 115000 U... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
Posted Date:
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