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Transcription of this question: 2.stay Float (SF)Stay Float (SF) is a family-owned private limited company that produces rowing boats. Dan isthe Marketing Director and Ori, his brother, is the Finance Director. Together they own 75% OfSF’s shares. The main target market is university boat clubs that require custom-made rowing boats.SF produces two models Of boat, “The Single” and “The Quad”, using a job production method.Each model of boat is treated as separate profit centres.SF is market-orientated and highly responsive to customer needs. Customers are willing to wait along time for the completion Of a boat because Of its high quality and flexible design. Employees arehighly skilled and motivated. SFuses a price skimming strategy.Increasing overseas competition Of cheaper mass-produced rowing boats and a cut in universityactivity budgets has caused a fall in demand for SFS boats. As a result, SF is experiencing cash flowdifficulties. Dan and Ori are considering two different strategic options to reduce costs and find newmarket segments for both boats:(Option 1 ) change the production method to flow production to improve the working capital cycle.However, Ori is concerned about how this will be financed.(Option 2) subcontract the production Of the “The Quad” overseas and continue producing’ ‘The Single” at the current location.sales price for “The Single”: 5000.sales price for “The Quad”: $25 000.Current financial data for 2014:Total fixed costs for SFVariable cost per boatActual number Of boats producedand soldProduction capacityssoooo”The Single”‘ OOO”The Quad”‘ s18000″The Single”‘6 boats”The Quad”: 4 boats20 boats in totalFinancial data if SF subcontracts “The Quad” overseas (Option 2):production capacity for the subcontractor: 40 boats.• the total fixed cost will be reduced by $14 000.SF will pay a variable cost Of S 14 000 per boat to the subcontractor.• SF will reduce the price Of the mass-produced “The Quad” by and double the quantity sold inthe first year.the quantity of “The Single” (6 boats) sold will remain unchanged.(a)(b)(c)(d)Describe two features Of SF operating as a private limited company.Explain two advantages and one disadvantage for SF of operating “The Single”and “The Quad” as separate profit centres.Calculate for SF (show all your working):(i) the current capacity utilization in 2014.(ii) the break-even quantity for “The Single” if the subcontracting option(Option 2) is chosen.(iii) whether the production Of “The Quad” should be subcontracted overseas(Option 2), assuming that the sales Of ‘ ‘The Single” stay the same asin 2014.Analyse the suggestion that SF should change from job production toflow production (Option 1).[4 marks][6 marks][2 marks][2 marks][5 marks][6 marks]

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