P19-6B Discount Gas Corporation wants to move its sales-order system to the Web. Under the proposed system,

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P19-6B Discount Gas Corporation 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 Discount Gas Web page, will be able to check the availability and current price of various products and place an order. The system processes the order electronically through links with the firm's traditional mainframe-based ordering system, without human intervention. Currently, customer service representatives take dealers' orders over the phone: they first record the information on a paper order form, then manually enter it into the firm's computer system. CFO Steve Pronai believes that dealers will not adopt the new Web system unless Discount Gas provides financial assistance to help them purchase or upgrade their PCs. Pronai estimates this one-time cost at $800,000. Discount Gas will also have to invest $150,000 in upgrading its own computer hardware. Consultants tell Pronai that together the cost of the software and the consulting fee for installing the system will be $230,000. The Web system will enable Discount Gas to eliminate 25 clerical positions. Pronai estimates that the benefits of the new system's lower labor costs will have a present value of $1,400,000. Required Use a cost-benefit analysis to recommend to Steve Pronai whether or not Discount Gas should proceed with the Web-based ordering system. Give your reasons, showing supporting calculations.

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Accounting

ISBN: 9780130906991

5th Edition

Authors: Charles T. Horngren, Walter T. Harrison, Linda S. Bamber, Betsy Willis, Becky Jones

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