Consider the Unity Gas proposed entry into the online ordering system in P1-42B.

Bronson revises her estimates of the benefits from the new system’s lower labor costs.

She now thinks the savings will be only \($936,000\).

Requirements:

1. Compute the expected benefits of the online ordering system.
2. Would you recommend that the company accept the proposal?
3. Before Bronson makes a final decision, what other factors should she consider?

Data From P1-42B:-

Unity 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.

CFO Jonelle Bronson believes that dealers will not adopt the new online system unless Unity Gas provides financial assistance to help them purchase or upgrade their computer network. Bronson estimates this one-time cost at \($765,000\). Unity Gas will also have to invest \($150,000\) in upgrading its own computer hardware. The cost of the software and the consulting fee for installing the system will be \($240,000\). The online system will enable Unity Gas to eliminate 25 clerical positions. Bronson estimates that the new system’s lower labor costs will save the company \($1,370,000\).