unit exercise4.docx - 1 You are trying to decide whether to approve a development budget for a new ERP system If you are not convinced you could always

unit exercise4.docx - 1 You are trying to decide whether to...

This preview shows page 1 - 2 out of 3 pages.

1. You are trying to decide whether to approve a development budget for a new ERP system. If you are not convinced, you could always skip out on deployment, with no net costs or gains. You could definitely be more aggressive. Here are two options. You could choose System A, which would result in additional sales of either $50,000 under good conditions or $10,000 under bad conditions. You could also choose System B, which would increase sales by $36,000 whether the market condition is good or bad. Assume that good conditions are three times as likely as bad conditions. Which option should you pursue if an ERP system costs $35,000? System A System B 50,000*3/4+10,000*1/4=40,000 36,000*3/4+36,000*1/4=36,000 System Cost -35,000 -35,000 Revenue 5,000 1,000 According to the answer, the company should choose System A. Through calculation, it can be known that although the sales amount of system A differs significantly between good and bad conditions, the result can still be 5000 dollars in sales. The relatively stable B system does not affect sales, but the final profit is only 1,000 dollars. So, choosing System A can increase sales more.
Image of page 1
Image of page 2

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture