As CEO of Ocean World, Rita Greenwood knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When DMG Consulting proposes that Ocean World invest in an ERP system, she forms a team to evaluate the proposal: the plant engineer, the plant foreman, the systems specialist, the human resources director, the marketing director, and the management accountant. A month later, management accountant Marcus Chumura reports that the team and DMG estimate that if Ocean World implements the ERP system, it will incur the following costs:

Costs of the Project

a. $360,000 in software costs

b. $72,000 to customize the ERP software and load OceanWorld's data into the new ERP system

c.$115,000 for employee training

Benefits of the Project

a.	More efficient order processing should lead to savings of $175,000.
b.	Streamlining the manufacturing process so that it maps into the ERP system will create savings of $125,000.
c.	Integrating purchasing, production, marketing, and distribution into a single system will allow OceanWorld to reduce inventories, saving $210,000.
d.	Higher customer satisfaction should increase sales, which, in turn, should increase profits by $165,000.

Requirement 1. If the ERP installation succeeds, what is the dollar amount of the benefits?

If the ERP installation succeeds, the dollar amount of the benefits is

.

Requirement 2. Should OceanWorld install the ERP system? Why or why not? Show your calculations.

Complete the table below to calculate the expected net benefits (costs) of the project. (Use parentheses or a minus sign for net costs.)

Expected benefits
Expected costs
Net benefits (costs)

Since the expected value of the benefits (are less than ,are greater than )the total costs, Ocean World(should not,should)undertake the project.

Requirement 3. Why did Stuckey create a team to evaluate DMG's proposal? Consider each piece of cost-benefit information that management accountant Chumura

reported. Which person on the team is most likely to have contributed each item?

(Hint: Which team member is likely to have the most information about each cost or benefit?)

Stuckey formed a team to evaluate the feasabilty of installing an ERP system for the following reasons. (If a box is not used in the table, leave the box empty; do not select a label.)

Forming a team would lower the cost of evaluating the system.

She did not want to take sole responsibility for the decision

the project was too big for one person

the representatives of different functional business areas have different knowledge and information to contribute

the representatives of different functional business areas have the same knowledge and will offer similar perspectives.

Consider each piece of cost-benefit information that management accountant Chumura reported. Which person on the team is most likely to have contributed each item?

(Hint: Which team member is likely to have the most information about each cost or benefit?) (If a box is not used in the table, leave the box empty; do not select a label.)

a.	Estimating software costs
b.	Estimating cost of loading data into the new ERP system
c.	Customize the ERP software
d.	Estimate customization costs
e.	Estimate training costs
f.	Savings from more efficient order processing
g.	Savings from streamlining the manufacturing process
h.	Evaluate the effects of integrating purchasing, production,
	marketing, and distribution into a single system
i.	Estimate increase in sales from higher customer satisfaction
j.	Estimate benefits and costs