Northern Gas wants to move its sales order system online. Under the proposed system, gas

stations and other merchants will use a secure site to check the availability and current price of

various products and place an order. Currently, customer service representatives take dealers'

orders over the phone; they record the information on a paper form, then manually enter it into

the firm's computer system.

$($Click the icon to view additional information.$)$

Requirement

Use a cost$-$benefit analysis to recommend to Jennings whether Northern Gas should

proceed with the online ordering system. Give your reasons, showing supporting

calculations.

$($Use parentheses or a minus sign when entering a net cost.$)$

Expected benefits

Expected costs

Net benefits $($costs$)$

Cost Information

CFO Martha Jennings believes that dealers will not adopt the new online system

unless Northern Gas provides financial assistance to help them purchase or

upgrade their computer network. Jennings estimates this one$-$time cost at

$$740,000.$ Northern Gas will also have to invest $$155,000$ in upgrading its own

computer hardware. The cost of the software and the consulting fee for installing

the system will be $$230,000.$ The online system will enable Northern Gas to

eliminate $25$ clerical positions. Jennings estimates that the benefits of the

new system's lower labor costs will have saved the company $$1,365,000.$