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Lightening Bulk Company is a moving company specializing in transporting large items worldwide. The firm has an 85% on-time delivery rate. Thirteen percent of the items are misplaced and the remaining 2% are lost in shipping. On average, the firm incurs an additional $66 per item to track down and deliver misplaced items. Lost items cost the firm about $365 per item. Last year, the firm shipped 7,170 items with an average freight bill of $239 per item shipped.

The firms manager is considering investing in a new scheduling and tracking system costing $167,000 per year. The new system is expected to reduce misplaced items to 1% and lost items to 0.50%. Furthermore, the firm expects total sales to increase by 10% with the improved service. The average contribution margin ratio on any increased sales volume, after cost savings associated with a reduction in misplaced and lost items, is expected to be 37.5%.

1b. What is the estimated change in pretax cash flow under the proposed system? (Negative amounts should be indicated by a minus sign. Round your answers to the nearest whole dollar amount.)

1b. What is the estimated change in pretax cash flow under the proposed system? (Negative amounts should be indicated by a minus sign. Round your answers to the nearest whole dollar amount.)

Cost of the new system per year

Expected benefits each year from the system

Contribution Margin from sales increase

Cost savings from decrease in misplaced items-existing sales

Savings from decrease in misplaced items-existing sales

Change in pre-tax cash flow per year under the new system