Beacon Company is considering automating its production facility. million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use strail line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent the labor cost per unit. Current (no) automation) 82,000 units Proposed (automation) 125,000 units Production and sales volume Per Unit Per Total Unit Sales revenue $ 96 $ ? $ 96 Total $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing 40 ? costs Contribution margin $ 56 ? $ 59 Fixed manufacturing costs. $ 1,240,000 Net operating income ? $2,330,000 ? Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)

Beacon Company is considering automating its production facility. million, and the equipment has a useful life of 8 years with a residual value of $1,030,000. The company will use strail line depreciation. Beacon could expect a production increase of 43,000 units per year and a reduction of 20 percent the labor cost per unit. Current (no) automation) 82,000 units Proposed (automation) 125,000 units Production and sales volume Per Unit Per Total Unit Sales revenue $ 96 $ ? $ 96 Total $ ? Variable costs Direct materials $ 16 $ 16 Direct labor 15 ? Variable manufacturing overhead 9 9 Total variable manufacturing 40 ? costs Contribution margin $ 56 ? $ 59 Fixed manufacturing costs. $ 1,240,000 Net operating income ? $2,330,000 ? Determine the project's accounting rate of return. (Round your answer to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 18P

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