Q. 01). P1-31A E-commerce cost-benefit analysis (Learning Objective 5)
Sun Gas wants to move its sales order system to the Web. Under the proposed system, gas stations and other merchants will use a Web browser and, after typing in a password for the Sun Gas Web page, will be able 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 Carrie Smith believes that dealers will not adopt the new Web System unless Sun Gas provides financial assistance to help them purchase or upgrade their PCs. Smith estimates this one-time at $750,000. Sun 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 eh system will be $230,000. The Web System will enable Sun Gas to eliminate 25 clerical positions. Smith estimates’ that the new system’s lower labor costs will have saved the company $1,357,000.
Requirement
Use a cost-benefit analysis to recommend to Smith whether Sun Gas should proceed with the Web-based ordering system. Give your reasons, showing supporting calculations.
Q. 02). E2-21A Classify and calculate a manufacturer’s costs (Learning Objectives 3 & 4)
An airline manufacturer incurred the following costs last months (in thousands of dollars):
a.
Air plane seats
$ 250
b.
Depreciation on administrative offices
60
c.
Assembly worker’s wages
600
d.
Plant utilities
120
e.
Production supervisors salaries
100
f.
Jet engines
1,000
g.
Machine Lubricants
15
h.
Depreciation on forklifts
50
i.
Property tan on corporate marketing office
25
j.
Cost of warranty repairs
225
k.
Factory janitor’s wages
30
l.
Cost of designing new plant layout
175
m.
Machine operators health insurance
40
TOTAL
$2,690
Requirements
If the cost object is an…