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Transcription of this question: Wavin’ Surmoards (WS)Wavin ‘ Surjboards (WS) manufactures surfboards. The businesswas founded in 1978 by Brent Bass who operated it as asole trader. In 1991, after years Of sales growth and employingmany employees, Brent changed WS into a private limitedcompany. The growth in scale Of operation was a challengefor Brent, who had a laissez-faire leadership style. He lovedsurfing and as a young person he started producing and sellingsurfboards at his home. He had not received any business training.As the business grew Brent struggled to develop the businessand management skills necessary to operate the business.Due to the high quality and popularity Of the surfboards, salescontinued to increase. Brent’s accountant believes that thecompany will need a new larger building in two years. The spanOf control within the company is currently wide, and increasingthe number Of units (surfboards) produced would require[Source: http:/www_gralnsurtboardscom,employing more managers. For Brent, this would mean spending20 July 2012. Used with permission)more time supervising managers and less time producing andpromoting surfboards. Brent would also have to decide whether to recruit the new managersinternally or externally.Brent’s accountant prepared a comparison Of the current and proposed new scale Of operation.Brent’s accountant prepared a comparison Of the current and proposed new scale Of operation.Current buildingActual units MaximumProposed new buildingSales in unitsVariable costs r unit (SFixed costs per year (S)producedper year800590000Managers’ salaries per year (S)450000capacity unitsproducedper year3000800590 ooo450 oooInitialforecastedunits producedper year33007501 050 ooo600000Maximumcapacity unitsproducedper year7501050000900000The current sales price per surfboard will remain at S 1400 no matter the scale Of operation.[Used with permission](This question continues on the following page)(Question I continued)(b)(d)(i) Identify one advantage and one disadvantage Of internal recruitment.(ii) Describe one method Of external recruitment.Prepare a fully labelled break-even chart for WS at its current actual sales Of2400 units in the current building.(i) Calculate the contribution Of one surfboard in the proposed new building.(ii) Calculate the initial forecast profit for WS for its first year Of operation inthe proposed new building (show all your working).(iii) Explain why Brent’s accountant forecasted lower variable costs per unit inthe proposed new building.Using appropriate calculations for the actual units produced (2400) in thecurrent building and initial forecasted units produced (3300) in the proposednew building, analyse the impact Of the proposed new expanded scale Ofoperation on profits and profitability.[2 marks][2 marks][5 marks][l mark][3 marks][2 marks][5 marks]

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