Zeta Corporation is considering the advantages of automating a part of its production line. The company's financial statement follows:
Zeta Corporation
Total sales $40,000,000
Direct labor $12,000,000
Indirect labor $ 2,000,000
Direct materials $ 8,000,000
Depreciation $ 1,000,000
Taxes $ 500,000
Insurance $ 400,000
Sales costs $ 1,500,000
Total expenses $25,400,000
Net profit $14,600,000
The report is based on the production and sale of 100,000 units. The operations manager believes that an additional investment of $5 million can reduce the variable costs by 30 percent. The same output quantity and qualities would be maintained. Using 5-year straight-line depreciation of $1,000,000 per year, construct a breakeven chart. Based on the breakeven analysis, should Zeta introduce the automation?