Question
As CEO of OceanSideMarine, BarbJackson knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When
As CEO of OceanSideMarine, BarbJackson knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When IDG Consulting proposes that OceanSideMarine 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 Myles Calaway reports that the team and IDG estimate that if
OceanSideMarine implements the ERP system, it will incur the following costs:
Costs of the Project
a$370,000 in software costs
b.$97,000 to customize the ERP software and load OceanSide's data into the new ERP system
c. $145,000 for employee training
The team estimates that the ERP system should provide several benefits:
Benefits of the Project
a. | More efficient order processing should lead to savings of $190,000. |
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b. | Streamlining the manufacturing process so that it maps into the ERP system will create savings of $220,000. |
c. | Integrating purchasing, production, marketing, and distribution into a single system will allow OceanSideMarine to reduce inventories, saving $225,000. |
d. | Higher customer satisfaction should increase sales, which, in turn, should increase profits by $170,000. |
Requirements
1. | If the ERP installation succeeds, what is the dollar amount of the benefits? |
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2. | Should OceanSideMarine install the ERP system? Why or why not? Show your calculations. |
3. | Why did Jackson create a team to evaluate IDG's proposal? Consider each piece of cost-benefit information that management accountant Calaway 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?) |
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
$nothing.
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