ALMA CarFix Ltd$,$ a local car service center received an offer from one of the clients offering the company a

one$-$ year contract for additional work. The client requires a discount of $14\%$ to be allowed on the total

invoice value. Given the following information:

$1-$ Additional required capital investments will be:

The "Equipment" must be purchased by the ALMA CarFix Ltd$.$ and will not be usable for any other

contract. ALMA CarFix Ltd$.$ can either purchase the computers $($including software$)$ for $$12,000$ or lease

them for $$6,000$ per year. The "Computers and Software" may be used on other work after the end of

this particular contract for $2$ additional years.

Additional workers will be required. Four full$-$time skilled mechanics earning $$10$ per hour will each

work $40$ hours per week on the new contract. They are each allowed $4$ weeks per year paid holidays

and $2$ weeks paid training. Workers efficiency is $95\%$ measured as the ratio of sold hours$/$hours

attended. Training time and holiday time are charged to direct costs of the department. For each worker

the new contract will leave $10\%$ unsold hours available for any other jobs coming into the car service

center. One full$-$time car cleaner will be required earning $$18,000$ per annum.

$2-$ The client claimed that the likely increase in sales volume resulting from the new contract could be $5,200$

hours charged at a rate of $$25\mathrm{.}00$ per hour before discount. In addition, the increase in sales of car parts

is estimated on the basis of $$60\mathrm{.}00$ per hour with an average gross profit of $10\%$ before discount. The

increase in paint sales is calculated on the basis of $$5\mathrm{.}00$ per hour with an average gross profit of $25\%$

before discount.

$3-$ Additional annual overheads will be as follows:

$5$ Depreciation is calculated on a straight$-$line basis.

You were hired as a consultant to provide your opinion on the acceptability of the client's proposal.

Required:

$($a$)$ Highlight briefly all financial and nonfinancial considerations relevant to the decision$-$making process.

$($b$)$ Write a memo $3$ pages max. including any assumptions you have made; show all supporting calculations

and give advice to ALMA CarFix Ltd management indicating the financial and nonfinancial advantages

and disadvantages of the proposal.

IMPORTANT: Please type the answer no hand write. thank you