Sun 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.CFO Kate Rodriguez believes that dealers will not adopt the new online system unless Sun Gas provides financial assistance to help them purchase or upgrade their computer network. Rodriguez estimates this one-time cost at $ 745,000. Sun Gas will also have to invest $ 155,000 in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be $ 245, 000. The online system will enable Sun Gas to eliminate 25 clerical positions. Rodriguez estimates that the benefits of the new system's lower labor costs will have saved the company $ 1, 450,000. Use a cost-benefit analysis to recommend to Rodriguez whether Sun Gas should proceed with the online ordering system. Give your reasons, showing supporting calculations. 1- expected benefits? 2-expected cost? 3- Net benefits?
Answer : Sun Gas should proceed with the online ordering system
Reasons : 1)online ordering system will provide more benefits to the customers compared to the manual ordering system.
2)The online system will help to customers for checking the up-to date information about the current price and order status etc.
3) the online ordering system will also generates the net benefit because , cost is less than the benefit they saved
4)So sun Gas should better to proceed with the online ordering system with the above reasons
5) the customer service representatives will serve better and take orders easily from the customers.
CALCULATIONS
1)expected benefits =$1,450,000
2) expected cost = $745,000+155,000+245,000=$1,145,000
3)Net benefits = expected benefits -expected costs
=$1,450,000-$1,145,000
=$305,000
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