Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38 million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight- line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct naterials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Required: 3. Determine the project's payback period. Note: Round your answer to 2 decimal places. Current (no automation) 29,000 units Total $7 Per Unit $.98 $ 15 30 10 55 $43 1,240,000 Proposed (automation) 115,000 units Per Unit $ 98 $15 7 10 7 $.49 Total $7 2,210,000 2
Beacon Company is considering automating its production facility. The initial investment in automation would be $11.38 million, and the equipment has a useful life of 9 years with a residual value of $1,120,000. The company will use straight- line depreciation. Beacon could expect a production increase of 36,000 units per year and a reduction of 20 percent in the labor cost per unit. Production and sales volume Sales revenue Variable costs Direct naterials Direct labor Variable manufacturing overhead Total variable manufacturing costs Contribution margin Fixed manufacturing costs Net operating income Required: 3. Determine the project's payback period. Note: Round your answer to 2 decimal places. Current (no automation) 29,000 units Total $7 Per Unit $.98 $ 15 30 10 55 $43 1,240,000 Proposed (automation) 115,000 units Per Unit $ 98 $15 7 10 7 $.49 Total $7 2,210,000 2
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 1P: Talbot Industries is considering launching a new product. The new manufacturing equipment will cost...
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