erson on the to have the most information about each cost or

erson on the to have the most information about each cost or benefit?) to ldve contributed each item? (Hint: Which team member is like PI 42A E-commerce cost-benefit analysis (Learning Objective 5) un Gas wants to move its sales order system to the Web. Under the proposed system, gas stations and other merchants will use a Web browser and, after typing in a password for the Sun Gas Website, will be able 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, and then manually enter it into the firm\'s computer system. CFO Carrie Smith believes that dealers will not adopt the new Web system unless Sun Gas provides financial assistance to help them purchase or upgrade their PCs. Smith estimates this one-time cost at $750,000. Sun Gas will also have to invest $150,000 in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be $230,000. The Web system will enable Sun Gas to eliminate 25 clerical positions. Smith estimates that the new system\'s lower labour costs will save the company $1,357,000. Requirement Use a cost-benefit analysis to recommend to Smith whether Sun Gas should proceed with the Web-based ordering system. Give your reasons, showing supporting calculations

Solution

Cost Benefits anlaysis to be Recommended to CFO, Carrie Smith Amount in $ Reasons Benefits Saving in the form of Lower Labor costs under proposed system 1357000 Relevent Revenue Costs One time financial assistance to dealers 750000 Relevent Costs Upgradation of its own Computer hardware 150000 Relevent Costs Software & Consulting fees 230000 Relevent Costs Total costs to be incurred to implement Proposed sytem 1130000 Net Savings=Benfits-Costs 227000 Yes, Since there is net savings of $227000, Sun Gas should proceed with Web Based Ordering System