The Sloan Corporation is a moving company that transports household goods from one city to another within the continental United States. It measures quality. of service in terms of

(a) time required to transport goods,

(b) on-time delivery (within two days of agreed-upon delivery date), and

(c) number of lost or dam- aged shipments. Sloan is considering investing in a new scheduling and tracking system costing $160,000 per year, which should help it improve performance with respect to items

(b) and (c). The following information describes Sloan's current performance and the expected performance if the new system is implemented:

Sloan expects that each percentage point increase in on-time performance will result in revenue increases of $20,000 per year. Sloan's contribution margin per- centage is 45 percent. Required 1. Should Sloan acquire the new system? 2. What is the minimum amount of revenue increase that needs to occur for the bene- fits from the new system to equal the costs?

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On-time delivery performance Variable costs per carton lost or damaged Fixed cost per carton lost or damaged Number of cartons lost or damaged per year Current Performance Expected Future Performance 85% 95% $60 $60 $40 $40 3,000 cartons 1,000 cartons