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Required Information

Problem $17-68($Algo$)$ Relevant Costs and Quality Improvement $[$LO $17-2,17-5,17-6]$

$[$The following information applies to the questions displayed below.$]$

Lightening Bulk Company is a moving company specializing in transporting large items worldwide. The firm has an $85\%$ on$-$time dellvery rate. Thirteen percent of the items are misplaced and the remaining $2\%$ are lost in shipping. On average, the firm Incurs an additional $$66$ per item to track down and deliver misplaced items. Lost items cost the firm about $$335$ per item. Last year, the firm shipped $6,630$ items with an average freight bill of $$221$ per item shipped.

The firm's manager is considering investing in a new scheduling and tracking system costing $$149,000$ per year. The new system is expected to reduce misplaced items to $1\%$ and lost items to $0\mathrm{.}50\%.$ 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 assoclated with a reduction in misplaced and lost items, is expected to be $37\mathrm{.}5\%.$

Part $1($Algo$)$

Required:

$1$a$.$ Based on a relevant cost analysis, should the firm install the new tracking system?

$$ Yes

$$ No

$1$b$.$ What is the esumated change in pretax cash flow under the proposed system?

Note: Negatlve amounts should be Indicated by a minus sign. Round your answers to the nearest whole dollar amount.

$\backslash$table$[[$Cost of the new system $($per year$),,],[$Expected benefits each year from the new system:,,$],[$Contribution margin from sales increase,,$],[$Cost savings from decrease in misplaced items$-$existing saies,,$],[$Savings from decrease in lost items$-$existing sales,,$],[$Change in pre$-$tax cash flow per year under the new system,,$]]$