Question

Mid-West Gas wants to move its sales order system online. Under the proposed Requirement system, gas stations and other merchants will use a secure site to check the Use a cost-benefit analysis to recommend to Bardeen whether Mid-West Gas availability and current price of various products and place an order. Currently, should proceed with the online ordering system. Give your reasons, showing customer service representatives take dealers' orders over the phone; they record supporting calculations. the information on a paper form, then manually enter it into the firm's computer system. (Click the icon to view additional information.) Cost Information (Use parentheses or a minus sign when entering a net cost.) Expected benefits Expected costs Net benefits (costs) CFO Susan Bardeen believes that dealers will not adopt the new online system unless Mid - West Gas provides financial assistance to help them purchase or upgrade their computer network. Bardeen estimates this one-time cost at $750,000. Mid-West 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 Mid - West Gas to eliminate 25 clerical positions. Bardeen estimates that the benefits of the new system's lower labor costs will have saved the company $1,365,000. Print Done

Answer 1

Expected benefits = Savings in labor costs = $1,365,000

Expected costs

Cost of upgrading computer network	$750,000
Cost of upgrading own computer hardware	$155,000
Cost of software and consulting fee	$245,000
Total Expected costs	$1,150,000

Cost benefit analysis

Expected benefits	$1,365,000
Expected costs	- $1,150,000
Net benefits	$215,000

Net benefits of $215,000 would accrue if online system is adopted. Hence, Mid- west gas should proceed with the online ordering system

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