Star Gas wants to move its sales order system to the Internet. Under the proposed sys-tem, gas
Question:
CFO Carrie Smith believes that dealers will not adopt the new Internet system unless Star Gas provides financial assistance to help them purchase or upgrade their computer network. Smith estimates this one- time cost at $ 735,000. Star 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 $ 235,000. The Internet system will enable Star Gas to eliminate 25 clerical positions. Smith estimates that the new system’s lower labor costs will have saved the company $ 1,210,000.
Requirement
Use a cost- benefit analysis to recommend to Smith whether Star Gas should proceed with the Internet- based ordering system. Give your reasons, showing supporting calculations.
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