From the case study below:

State the issues

Conduct a Quantitative and Qualitative Analysis of the issues

Design a budget. Explain why the company is spending so much time budgeting. Others

WiseElect, a dynamic and innovative small-scale home appliance manufacturing company based in Vancouver, Canada, has experienced remarkable success in the domestic market. Renowned for its cutting-edge designs, energy efficiency, and integration of artificial intelligence technology, WiseElect is now set to embark on an expansion into new markets. The companys CEO, Peter Gallagher, has identified an opportunity to expand into the thriving Israeli market. However, this expansion requires additional funds that the company will need to raise through either debt or equity financing. As the CFO of WiseElect, your role is to evaluate the various issues below, provide recommendations on the expansion and optimal financing approach, as well as address the ethical dilemma of sustainability in the expansion process.

WiseElect has captured the attention of consumers with its game-changing home appliances that combine functionality, style, and the power of artificial intelligence. These smart appliances incorporate advanced AI technology, enabling users to interact with their appliances through voice commands, smartphone apps, and intelligent automation. For instance, the company's AI-powered refrigerator uses computer vision to recognize and track food items, provide recipe suggestions, and optimize energy usage based on user preferences. Having experienced some recent blood pressure concerns, Peter is especially interested in using this functionality to help motivate him on his own journey towards living a healthier lifestyle and has recently launched a new marketing campaign using the slogan MotivAte Me. He is worried that the company is spending too much on marketing but believes this will pay off in the long run. The companys AI-enabled home appliances have attracted widespread acclaim for their ability to enhance convenience, energy efficiency, and user experience. With a focus on energy efficiency and sustainability, WiseElect has become a trusted brand among environmentally conscious consumers. WiseElect's most recent set of financial statements is included in AppendixA.

Model X:

WiseElect has recently invested in new artificial intelligence (AI) technology to produce a new refrigerator model called Model X. The new technology would automatically determine when to order new groceries based on customer eating habits. This technology aims to enhance customer convenience and increase sales. The CEO has asked the Operations Director, Olu Manuel, to put together a quarterly sales, production, and direct materials budget for the first year of sales of this product line. Olu has provided the financial information in Appendix C, however has requested your assistance in building these budgets. He wants to understand why the company is spending so much time budgeting, and how these budgets can be used to make decisions and monitor the performance of the new product line going forward. Hes also looking for some guidance on whether the projected gross profit margins for the Model X look healthy in year 1 (2024), and some ideas on how the team can reduce their projected direct material costs.

APPENDIX A: WiseElectFinancial Statements

WiseElect

BALANCE SHEET

December 31, 2022

	2022	2021
ASSETS
Current Assets
Cash	$600,000	$500,000
Accounts Receivable	$400,000	$300,000
Inventory	$900,000	$700,000
Total Current Assets	$1,900,000	$1,500,000
Land & Buildings	$2,000,000	$2,000,000
Equipment	$1,800,000	$1,500,000
Intangible Assets	$200,000	$200,000
TOTAL ASSETS	$5,900,000	$5,200,000
LIABILITIES
Current Liabilities
Accounts Payable	$500,000	$400,000
Accrued Expenses	$150,000	$100,000
Unearned Revenue	$200,000	$200,000
Total Current Liabilities	$850,000	$700,000
Long-Term Debt	$700,000	$800,000
TOTAL LIABILITIES	$1,550,000	$1,500,000
SHAREHOLDERS EQUITY
Common Stock	$500,000	$500,000
Retained Earnings	$3,100,000	$2,700,000
Additional Paid-inCapital	$750,000	$500,000
Shareholders Equity	$4,350,000	$3,700,000

WiseElect

INCOME STATEMENT

For the period ending December31, 2022

	2022	2021
Revenue
Sales Revenue	$4,800,000	$3,700,000
Service Revenue	$200,000	$300,000
Total Revenue	$5,000,000	$4,000,000
Cost of GoodsSold	$2,800,000	$2,200,000
Gross Profit	$2,200,000	$1,800,000
Operating Expenses
Salaries &Wages	$700,000	$600,000
Rent & Utilities	$250,000	$200,000
Marketing Expenses	$400,000	$300,000
Other Operating Expenses	$150,000	$100,000
Total Operating Expenses	$1,500,000	$1,200,000
Operating Income	$700,000	$600,000
Interest Expense	$50,000	$60,000
Income Before Tax	$650,000	$540,000
Tax Expense	$195,000	$162,000
Net Income	$455,000	$378,000

APPENDIX C: Model X Budget Information

The Operations Director has provided the following financial details to assist in the preparation of the requested budgets for the first year (2024).

• Expected Q1 sales volume:1,000 units with a 15% increase each quarter in 2024. Q1 sales for 2025 are expected to be the same as Q4 sales in 2024.
• Selling price per unit:$1,000 in 2024, and $800 in 2025
• Raw materials cost per pound: $10
• Volume of raw materials per unit: 50 pounds
• Direct labor cost per unit: $200
• Variable manufacturing overhead cost per unit: $100
• Fixed manufacturing overhead cost per year: $300,000
• Selling and administrative expenses per year: $200,000
• Desired ending raw materials inventory: 20% of next quarters expected production requirements. The desired ending raw materials inventory at the end of Q4 2024 is 16,202 pounds.
• Desired ending finished goods inventory: 30% of next quarters expectedsales units