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I need the calculations and workings done please. Would this be possible The Kalgan Driftwood Company Background The Kalgan Driftwood Company (Kalgan) was established in
I need the calculations and workings done please. Would this be possible
The Kalgan Driftwood Company Background The Kalgan Driftwood Company (Kalgan) was established in 1950. It is located on a 100 hectare site in a beautiful scenic location on the banks of the Kalgan River. The company has built its reputation on making quality furniture at affordable prices from castoff jarrah wood from a nearby timber mill. Part 1 Re cover service Kalgan, which sources its fabrics from Indonesia and Vietnam, offers a choice of over 50 different fabrics. Kalgan is considering offering a recover service to supply replacement cushions when the existing ones wear out or customers wish to change their fabric since a recent study found that customers kept their Kalgan furniture for an average of 18 years. The recover service will make three sizes of covers: large, medium and small. The company accountant has carried out an investment appraisal of the new recover service assuming a project life of 5 years. The net cash flows on a relevant cost basis for each of the five years were as follows: Year Net cash flows 0 (140,000) 1 23,240 2 45,780 3 54,320 4 54,320 5 54,320 Budget data for the first year of the recover service are as follows: Large Medium Sales (units) 2,300 1,500 Selling price per unit 112 84 12.60 8.40 Direct labour cost per unit Fabric cost per unit 44.80 32.20 Contribution per unit 54.60 43.40 Specific Fixed Costs: Factory power costs: 84,000 per annum Lease of equipment for recover service: 70,000 per annum The expected time to produce each size of cover is as follows: Recover Service Time to make each cover Large Medium 0.6 hour 0.4 hour The production director has now informed the board that the supply of skilled labour for year 1 will be restricted to a maximum of 2,500 hours. The company's cost of capital is 10% per annum. Required a) Calculate the budgeted profit after specific fixed costs, for year 1 of the recover operation, assuming demand can be met in full. (4 marks) b) Calculate the sales mix that will maximise budgeted profit for year 1 of the recover operation based on the limited availability of labour. (8 marks) c) Suggest two actions that the company could take to overcome the shortage of labour. (4 marks) d) Calculate the payback period for the recover project. (3 marks) e) Calculate the net present value for the recover project. (6 marks) 0.2Step by Step Solution
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