Question

Northern Gas wants to move its sales order system online. Under the proposed​system, gas stations and other merchants will use a secure site to check the availability and current price of various products and place an order.​ Currently, customer service representatives take​ dealers' orders over the​ phone; they record the information on a paper​ form, then manually enter it into the​ firm's computer system.

cost information

CFO

Kayla Flores believes that dealers will not adopt the new online system unless Northern

Gas provides financial assistance to help them purchase or upgrade their computer network.

Flores estimates this​ one-time cost at $745,000.

Northern Gas will also have to invest $165,000

in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be $225,000.

The online system will enable Northern

Gas to eliminate 25 clerical positions.

Flores estimates that the benefits of the new​ system's lower labor costs will have saved the company $1,420,000.

Requirement

Use a​ cost-benefit analysis to recommend to

Gas should proceed with the online ordering system. Give your​ reasons, showing supporting calculations.

Expected benefits

Expected costs

Net benefits (costs)

Answer 1

Solution :-

It should recommend that Northern Gas should proceed with the online ordering system because the expected benefits are greater than the expected costs by $ 285,000.