As CEO ofOceanSide Marine, Dana Stuckey knows it is important to control costs and to respond quickly to changes in the highly competitive boat-building industry. When ABCABC Consulting proposes that OceanSide Marine 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 Mark Cook reports that the team and ABCABC estimate that if OceanSide Marine implements the ERP system, it will incur the following costs:

Costs of the Project

a.$420,000 in software costs

b.$87,000 to customize the ERP software and load OceanSide's data into the new ERP system

c.$110,000 for employee training

Benefits of the Project

a.

More efficient order processing should lead to savings of $185,000.

b.

Streamlining the manufacturing process so that it maps into the ERP system will create savings of $270,000.

c.

Integrating purchasing, production, marketing, and distribution into a single system will allow OceanSide MarineOceanSide Marine to reduceinventories, saving $210,000.

d.

Higher customer satisfaction should increase sales, which, in turn, should increase profits by$140,000.

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

OceanSide MarineOceanSide Marine

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 greater than

are less than

the total costs,

OceanSideOceanSide

should

should not

undertake the project.

Requirement 3. Why did

ThornbergThornberg

create a team to evaluate

ABCABC's

proposal? Consider each piece of cost-benefit information that management accountant

CookCook

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?)

ThornbergThornberg

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.)

Consider each piece of cost-benefit information that management accountant

CookCook

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