Use $14.50 per unit for Walks Automotive. Assume the same level of sales each month for the next two years.

Please show calculations in steps if possible.

9.1 Allure Canada Allure is a Japanese automotive manufacturer that specializes in family sedans, trucks, and SUVs. In the 1980s, Allure saw a great opportunity to sell its vehicles in North America. As a result, in 1981 Allure started Allure Canada, a wholly owned subsidiary of Allure Japan. Since 1981, the Allure brand has become very popular in Canada. Many published consumer reports have referred to the Allure sedan as the safest family car on the road in Canada. The Allure vehicles are known for lasting several years and many families use theirs for more than 10 years. Other than regular maintenance, Allure vehicles generally do not require major repair within the first five years. Since the expansion into North America, Allure has subsidiaries all over the world, including several European countries. In 1981, when Allure first started its operations in Canada, 100% of the manufacturing was in Japan. In 1990, Allure opened its first manufacturing facility outside of Japan in Ontario. The Ontario plant would be responsible for manufacturing all of the vehicles for the Canadian market. The majority of the parts are manufactured in-house or outsourced to a third party in Canada. In order to maintain control, Allure Japan shipped all spark plugs (an important part of each engine) to the Canadian subsidiary. Allure Japan has a very efficient inventory control system and traditionally has not involved the Canadian division in deciding how many spark plugs would be shipped to Canada each month. Allure Japan always ships enough spark plugs to Canada every month to ensure that 50% of the next month's demand is met. (Each vehicle requires four spark plugs.) During 20X2, Japan suffered from a very significant earthquake that caused severe dam- age across the country, including the destruction of Allure's manufacturing plant. On December 15, Allure Japan notified the Canadian subsidiary that it would not be shipping any more spark plugs to Canada for at least one year. On December 15, Allure Canada's Vice President of Operations, Elena Zajac, received the notice that Allure Japan would not ship any more spark plugs for a year, and she called an emergency meeting. At the meeting were the production manager, Alain Boulerice, and you, the cost accountant. Elena has asked that you review sales forecasts (Exhibit 1) for the following year, and determine the monthly amounts of spark plugs to purchase and the cash requirements to do so. As soon as the earthquake hit Japan, Alain was wor- ried that something like this could happen. Alain has received quotes from two suppliers (Exhibit 2) and brought them to the meeting for your review. Required Elena has asked you to state which one of the suppliers' offers you would recommend and mention your potential concerns. Write a report to Elena, keeping in mind that Allure Canada has a limited number of spark plugs in inventory. EXHIBIT 1-SALES FORECAST Planned Car Sales Per Month (In Units) Jan. Feb. Mar. April 4,200 May 4,500 June 8,000 6,500 5,500 4,000 Oct. Nov. Dec. July 8,500 Aug. 9,950 Sept. 9,000 9,000 5,500 2,000 EXHIBIT 2-SUPPLIER QUOTES Quote #1 To: Allure Canada From: Walks Automotive Re: Spark Plug Purchase Walks Automotive is a wholly owned subsidiary of TCI Automotive (a German automotive manufacturer). Walks Auto- motive has operated under the control of TCI Automotive for 20 years. The company manufactures various engine parts such as cylinders, pistons, spark plugs, and valves. These parts are primarily manufactured for TCI Automotive, Canada. However, Walks Automotive has recently expanded and also supplies other automotive manufacturers in Canada. Walks Automotive makes top quality a priority and will only provide top-quality products. Pricing: $24.99 (per unit) Guarantee: Each spark plug comes with a one-year guarantee. The guarantee period begins when the vehicle is delivered to the customer. The dealer will be responsible for replacing any defective spark plug and filing a claim with Walks Automotive for reimbursement. Delivery Terms: Each shipment will be delivered within 30 days of purchase. If the delivery date is not met, Walks Automotive will deliver the shipment free of charge. Payment Terms: Due on delivery Quote #2 SPARKS INC. Sparks Inc. specializes in the manufacturing of spark plugs. Sparks Inc. is based in Florida, but ships to anywhere in North America. Sparks Inc. has been in operation for three years. Pricing: $13.99 (CDN dollars, per unit) Payment Terms: 5% of the outstanding balance when the product is delivered, 30% in the following month, and the balance two months after the purchase is made Money Back Guarantee: Sparks Inc. will replace any malfunctioning spark plug, free of charge, to its customers. Upon initial testing of the engine, if the spark plug does not work, Sparks Inc. will replace the spark plug. (Note: This offer is valid within 3 months of purchase.) Delivery Terms: Sparks Inc. aims to ensure that each order placed is delivered within 15 days of purchase. 9.1 Allure Canada Allure is a Japanese automotive manufacturer that specializes in family sedans, trucks, and SUVs. In the 1980s, Allure saw a great opportunity to sell its vehicles in North America. As a result, in 1981 Allure started Allure Canada, a wholly owned subsidiary of Allure Japan. Since 1981, the Allure brand has become very popular in Canada. Many published consumer reports have referred to the Allure sedan as the safest family car on the road in Canada. The Allure vehicles are known for lasting several years and many families use theirs for more than 10 years. Other than regular maintenance, Allure vehicles generally do not require major repair within the first five years. Since the expansion into North America, Allure has subsidiaries all over the world, including several European countries. In 1981, when Allure first started its operations in Canada, 100% of the manufacturing was in Japan. In 1990, Allure opened its first manufacturing facility outside of Japan in Ontario. The Ontario plant would be responsible for manufacturing all of the vehicles for the Canadian market. The majority of the parts are manufactured in-house or outsourced to a third party in Canada. In order to maintain control, Allure Japan shipped all spark plugs (an important part of each engine) to the Canadian subsidiary. Allure Japan has a very efficient inventory control system and traditionally has not involved the Canadian division in deciding how many spark plugs would be shipped to Canada each month. Allure Japan always ships enough spark plugs to Canada every month to ensure that 50% of the next month's demand is met. (Each vehicle requires four spark plugs.) During 20X2, Japan suffered from a very significant earthquake that caused severe dam- age across the country, including the destruction of Allure's manufacturing plant. On December 15, Allure Japan notified the Canadian subsidiary that it would not be shipping any more spark plugs to Canada for at least one year. On December 15, Allure Canada's Vice President of Operations, Elena Zajac, received the notice that Allure Japan would not ship any more spark plugs for a year, and she called an emergency meeting. At the meeting were the production manager, Alain Boulerice, and you, the cost accountant. Elena has asked that you review sales forecasts (Exhibit 1) for the following year, and determine the monthly amounts of spark plugs to purchase and the cash requirements to do so. As soon as the earthquake hit Japan, Alain was wor- ried that something like this could happen. Alain has received quotes from two suppliers (Exhibit 2) and brought them to the meeting for your review. Required Elena has asked you to state which one of the suppliers' offers you would recommend and mention your potential concerns. Write a report to Elena, keeping in mind that Allure Canada has a limited number of spark plugs in inventory. EXHIBIT 1-SALES FORECAST Planned Car Sales Per Month (In Units) Jan. Feb. Mar. April 4,200 May 4,500 June 8,000 6,500 5,500 4,000 Oct. Nov. Dec. July 8,500 Aug. 9,950 Sept. 9,000 9,000 5,500 2,000 EXHIBIT 2-SUPPLIER QUOTES Quote #1 To: Allure Canada From: Walks Automotive Re: Spark Plug Purchase Walks Automotive is a wholly owned subsidiary of TCI Automotive (a German automotive manufacturer). Walks Auto- motive has operated under the control of TCI Automotive for 20 years. The company manufactures various engine parts such as cylinders, pistons, spark plugs, and valves. These parts are primarily manufactured for TCI Automotive, Canada. However, Walks Automotive has recently expanded and also supplies other automotive manufacturers in Canada. Walks Automotive makes top quality a priority and will only provide top-quality products. Pricing: $24.99 (per unit) Guarantee: Each spark plug comes with a one-year guarantee. The guarantee period begins when the vehicle is delivered to the customer. The dealer will be responsible for replacing any defective spark plug and filing a claim with Walks Automotive for reimbursement. Delivery Terms: Each shipment will be delivered within 30 days of purchase. If the delivery date is not met, Walks Automotive will deliver the shipment free of charge. Payment Terms: Due on delivery Quote #2 SPARKS INC. Sparks Inc. specializes in the manufacturing of spark plugs. Sparks Inc. is based in Florida, but ships to anywhere in North America. Sparks Inc. has been in operation for three years. Pricing: $13.99 (CDN dollars, per unit) Payment Terms: 5% of the outstanding balance when the product is delivered, 30% in the following month, and the balance two months after the purchase is made Money Back Guarantee: Sparks Inc. will replace any malfunctioning spark plug, free of charge, to its customers. Upon initial testing of the engine, if the spark plug does not work, Sparks Inc. will replace the spark plug. (Note: This offer is valid within 3 months of purchase.) Delivery Terms: Sparks Inc. aims to ensure that each order placed is delivered within 15 days of purchase