The Kalgan Driftwood Company Case Study Questions Solved (100%)

The Kalgan Driftwood Company Case Study Questions Solved (100%)

Here is part of the question:

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 cast-off jarrah wood from a nearby timber mill.
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 re-cover 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 re-cover service will make three sizes of covers: large, medium and small.
The company accountant has carried out an investment appraisal of the new re-cover 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:

Question A
(i) Calculate the budgeted profit after specific fixed costs, for year 1 of the re-cover operation, assuming demand can be met in full.
(ii) Calculate the sales mix that will maximise budgeted profit for year 1 of the re-cover operation based on the limited availability of labour.
(iii) Suggest two actions that the company could take to overcome the shortage of labour.
(iv) Calculate the payback period for the re-cover project.
(v) Calculate the net present value for the re-cover project.