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In: Accounting
Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating...
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 | ? | ? | |||||||
5. Recalculate the NPV using a 8 percent discount rate. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor(s) from the tables provided. Negative amount should be indicated by a minus sign. Enter the answer in whole dollars.)
Solutions
Expert Solution
| Current (No Automation) | Proposed (Automation) | ||||
| 73000 | 121000 | ||||
| Per unit | Total | Per unit | Total | Difference | |
| Sales Revenue | $92 | $6,716,000 | $92 | $11,132,000 | $4,416,000 |
| Variable cost | |||||
| Direct Material | $18 | $1,314,000 | $18 | $2,178,000 | $864,000 |
| Direct Labour (20*80%) | $20 | $1,460,000 | $16 | $1,936,000 | $476,000 |
| Variable Manufacturing OH | $10 | $730,000 | $10 | $1,210,000 | $480,000 |
| Less: Total Variable maufacturing cost | $48 | $3,504,000 | $44 | $5,324,000 | $1,820,000 |
| Contribution Margin | $44 | $3,212,000 | $48 | $5,808,000 | $2,596,000 |
| Less: Fixed Manufacturing costs | $1,170,000 | $2,280,000 | $1,110,000 | ||
| Net opeating Income | $2,042,000 | $3,528,000 | $1,486,000 | ||
| Computation of Present Value | |
| Annual Net Operating Income | $1,486,000.00 |
| Cumm PVAF @ 8% for 5 Year | 3.99271 |
| PV of Annual Cash Flow (C=AXB) | $5,933,167.06 |
| PV of Residual Value (116000X0.68058) | $78,947.28 |
| Presetn Value of Cash Inflow ( C+D) | $6,012,114.34 |
| Less: Initial Investment | $6,410,000.00 |
| NPV | -$397,885.66 |
ekkarill92 answered 1 year agoRelated Solutions
Required information [The following information applies to the questions displayed below.] Beacon Company is considering automating...
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...
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Laker Company reported the following January purchases and sales
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Date
Activities
Units Acquired at Cost
Units sold at Retail
Jan.
1
Beginning inventory
185
units
@
$
11.00
=
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Jan.
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Sales
145
units
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Jan.
20
Purchase
100
units
@
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Jan.
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Sales
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Jan.
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Purchase
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Laker Company reported the following January purchases and sales
data for its only product.
Date
Activities
Units Acquired at Cost
Units sold at Retail
Jan.
1
Beginning inventory
235
units
@
$
16.00
=
$
3,760
Jan.
10
Sales
200
units
@
$
25.00
Jan.
20
Purchase
180
units
@
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15.00
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Jan.
25
Sales
190
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Purchase
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Warnerwoods Company uses a perpetual inventory system. It entered
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Date
Activities
Units Acquired at Cost
Units Sold at Retail
Mar.
1
Beginning
inventory
100
units
@ $50.00 per
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Mar.
5
Purchase
400
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Mar.
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Purchase
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Cascade Company was started on January 1, Year 1, when it
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Required information [The following information applies to the questions displayed below.] Cascade Company was started on...
Required information
[The following information applies to the questions
displayed below.]
Cascade Company was started on January 1, Year 1, when it
acquired $168,000 cash from the owners. During Year 1, the company
earned cash revenues of $96,300 and incurred cash expenses of
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Required
Prepare a Year 1 income statement, capital statement (statement of
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under each of the following assumptions. (Consider...
Required information [The following information applies to the questions displayed below.] Laker Company reported the...
Required information
[The following information applies to the questions
displayed below.]
Laker Company reported the following January purchases and sales
data for its only product.
Date
Activities
Units Acquired at Cost
Units sold at Retail
Jan.
1
Beginning inventory
175
units
@
$
10.00
=
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1,750
Jan.
10
Sales
135
units
@
$
19.00
Jan.
20
Purchase
130
units
@
$
9.00
=
1,170
Jan.
25
Sales
140
units
@
$
19.00
Jan.
30
Purchase
275
units...
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