Louisville Slugger Incorporated $($LSI$)$ is a manufacturer of traditional baseball equipment. The company was established by Lawrence Alexander in $1951,$ and at that time only produced wooden baseball bats. LSI has evolved over the past $70+$ years to offer a wide variety of products, including aluminum bats, batting gloves, cleats, and fielding gloves. LSIs products have been sold in Canada, the United States, and Mexico. Since its inception, the company has remained a private corporation with Jason Alexander $($Lawrences oldest son$)$ as the sole owner of LSIs outstanding shares. Despite being a private corporation, LSI has elected to report under IFRS with the hopes of going public someday. After Lawrence Alexanders retirement in $2011,$ Jason took over as CEO of LSI. The move was expected as Lawrence had been preparing Jason to run the company when he retired. What was very unexpected was how Jason would respond to the promotion. Jason became very reactive and made snap decisions without consulting with the LSI executives. He would do things like fire employees on the spot or sign deals without reading the fine print. One of the biggest issues surrounding Jason was his obsession with technology. In a sport that is built on tradition and nostalgia, technology is often slowly adopted. Jason would frequently suggest new technologies that could be applied to LSIs products, but most of the time he became sidetracked before he could implement any significant changes. However, one of the changes he did implement was the shift in focus from traditional baseball equipment production to performance baseball apparel production. Now, LSI still produces traditional baseball equipment, but Jason wanted the focus of LSI to be on performance baseball apparel. Performance baseball apparel is regular baseball apparel $($shirts$,$ pants, shorts, jackets, and socks$)$ that are made from high$-$performance materials such as acrylic, Lycra, and elastomultiester. These materials are made to wick moisture away from a baseball player's body and to help them stay cool and comfortable. Even though LSI has spent the last ten years perfecting the technology required to mass$-$produce performance baseball apparel, they were not considered a leader in this industry and paled in comparison to larger competitors such as Under Armor and Nike. The production of performance baseball apparel at LSI was Jasons idea and he had continued to pursue this strategy despite numerous setbacks. Jason truly believed that within the next ten years, every professional, amateur, recreational, and little league team would be wearing clothing made from high$-$performance materials. It is this belief that has kept LSI heading down the performance apparel path for so long. This belief, however, is not shared by all of the executives at LSI, many of whom believe that Jasons refusal to exit the performance baseball apparel market could eventually lead to bankruptcy for the $70-$year$-$old company. Jason has spent the last few months contemplating the future of LSI and has concluded that to regain the trust and respect of the LSI executives, he must come up with a solid five$-$year strategic plan. He needed to put together a plan that was profitable, sustainable, and achievable. He knew that the doubter's voices were growing louder and louder with each passing board meeting. He also knew that without a solid five$-$year plan, the next board meeting could be his last. Section $1$ Accounting Mess One of the biggest issues with LSI is that the accounting department has been unable to put together proper schedules for the past few years. As a result, the information they have been providing is often late and is always inaccurate. Jason would like you to look at Appendix I, use the information provided, and prepare the following schedules for the company as of December $31,2022$: a$)$ Cost of Goods Manufacturedb$)$ Cost of Goods Soldc$)$ Net Income Section $2$ Government GrantJason has recently come across a new government grant program that is part of an initiative to improve the productivity of Canadian companies and promote employment. The program provides eligible manufacturing companies with the opportunity to receive a forgivable loan to further the production of the company's best single product. Since the grant will only be given to support the production of a single product, all companies that apply must base their application on a single product. The following criteria are used to assess eligibility: $$ The grant will only be given to support one product per qualifying company.$$ The grant must be used for products that are popular and in demand.$$ The demand for a product is measured by the following variances:o Sales Price $/$ Market Volume $/$ Market Share.$$ The grant is only given to support products that are profitable. The following conversation took place on January $18,2023,$ between Jason Alexander $($CEO$)$ and Tara Alexander $($Controller$).$ Jason: Tara, I would like to you look at our numbers and determine if we qualify for the government grant we discussed last week. Tara: Not a problem, is there any area you would like me to focus on$?$Jason: I think the best approach would be to look at each of the products individually and then determine which products would put us in the best running to receive the grant.Tara: Would you like me to suggest one product that we should base our grant application on$?$Jason: No$,$ I think it would be best to rank the products from $1($best$)$ to $4($worst$).$Tara: Okay, that seems straightforward, how will I determine the ranking?Jason: You will have to prepare a qualitative and quantitative assessment and use this to support the recommendation that you make. This of course will be based on the criteria that are outlined in the grant application.Tara: Is there anything else you would like me to do$?$Jason: We have not looked at the negotiated transfer pricing policies within the company in a long time, so although it is not asked for in the grant application, I would like you to do a qualitative assessment of our transfer pricing strategy and provide a recommendation which will allow us to maximize our efficiency as an organization.Tara: Where can I find all the information for this report?Jason: You can find it in Appendix II$.$Tara: Awesome, thank you so much for the guidance.Jason: I am sure you will knock this report out of the park!Jason: Oh$,$ and Tara, could you ensure that you prepare a professional document, I will be out of town this coming week and we will be submitting your report without any modifications. Points will be taken away for poor formatting, confusing presentation, incorrect calculations, and missing components.Tara: Not a problem, I will prepare a professional document that will be used for the grant application and will ensure that I have everything laid out in a manner that is easy to read, understand, and makes sense.Tara: Excellent! I got this! Jason would like you to assume the role of Tara Alexander and put together an application for the government grant. Ensure you have a strong understanding of the grant criteria, and you provide Jason with ALL of the deliverables he requested. Section $3$ Streamline Products? After spending a few weeks contemplating the next move for LSI, Jason has come up with two options. The first option is to streamline the performance baseball apparel department by eliminating the less profitable products. Jason knows that the profitability of each product is limited by the number of operating hours available to his production staff. By cutting the fat LSI can focus on producing fewer products at a higher quality, which will lead to higher profitability. Jason has put together the numbers $($Appendix III$)$ from the performance baseball apparel production department. He would like you to create an optimal production schedule given the departmental constraints. He would also like you to determine the forecasted Operating Income Statement for each year until $2027.$ Ignore the impact of both taxes and the time value of money. Section $4$ The Big PictureAs the final ask for this project, Jason would like you to summarize all of the data, findings and analysis you have prepared in this report and put it together in a cohesive document. The document should contain the following:$$ Title Page$$ Overview of the issues$$ Analysis of Section $1$ Analysis of Section $2$ Analysis of Section $3$ Overall recommendation Your overview of the issues should be a high$-$level discussion on what Jason has asked you to do$,$ why is it important, how you are going to approach it$,$ and what you will do with the results. $(1-2$ pages$)$ Your analysis of each issue should include both a quantitative and qualitative discussion on each issue $($where applicable$)$ and a recommendation on each individual issue. $($no page limit$)$ Your overall recommendation should be a summary of the following: $(2-3$ pages$)$ What is your overall recommendation for LSI to succeed?$$ What should Jason do tomorrow?$$ What should Jason do over the next $30$ days?$$ What should Jason do over the next $90$ days? Appendix I Accounting Mess Beginning of YearEnd of YearFinished Goods Inventory$$1,352,513$$$456,136$Work in Process Inventory$987,565127,456$Raw Materials Inventory$5,652,8461,498,529$Sales$16,481,634$Direct Labour$3,707,597$Factory Supervisory Salaries$134,509$Income Tax Expense$201,763$Factory Insurance$560,454$Raw Material Purchases$1,254,683$Administrative Expenses$125,365$Sales Returns and Allowances$67,557$Factory Depreciation$112,091$Indirect Labour$89,673$Indirect Materials$224,182$ Note to Students The above chart can be copied and pasted directly into MS Excel, so you do not have to re$-$create the entire chart. Appendix II Government Grant$2023$ Actual NumbersSocksShortsPantsT$-$shirtsJacketsSales Price$19\mathrm{.}9949\mathrm{.}9979\mathrm{.}9929\mathrm{.}9999\mathrm{.}99$Variable Costs$14\mathrm{.}7534\mathrm{.}7558\mathrm{.}518\mathrm{.}7446\mathrm{.}35$Contribution Margin$5\mathrm{.}2415\mathrm{.}2421\mathrm{.}4821\mathrm{.}2553\mathrm{.}64$Fixed Costs$850,0001,250,0001,000,000900,0001,875,000$Industry Sales $($units$)500,000750,000600,000750,00065,0002023$ Budgeted NumbersSocksShortsPantsT$-$shirtsJacketsSales Price$22\mathrm{.}9949\mathrm{.}9984\mathrm{.}9931\mathrm{.}9984\mathrm{.}99$Variable Costs$15\mathrm{.}993554\mathrm{.}996\mathrm{.}9949\mathrm{.}99$Contribution Margin$7\mathrm{.}0014\mathrm{.}9930\mathrm{.}0025\mathrm{.}0035\mathrm{.}00$Fixed Costs$1,085,0001,223,500658,000546,6501,966,010$Industry Sales $($units$)600,000800,000780,0001,000,00050,000$Expected Sales $($units$)150,00080,00050,00043,00020,000$Margin of Safety$(19,265)(25,245)(31,751)6,240719,502$ Note to Students The above chart can be copied and pasted directly into MS Excel, so you do not have to re$-$create the entire chart. Notes$$ Each product is manufactured in its own department $($ex: socks are manufactured in the sock department$)$ Appendix III Streamline Products Performance Baseball Apparel$2024$ BudgetSocksShortsPantsT$-$shirtsJacketsSales $($units$)145,00085,00045,00050,00060,000$Sales Price $($per unit$)$$$19\mathrm{.}99$$$49\mathrm{.}99$$$74\mathrm{.}99$$$27\mathrm{.}99$$$129\mathrm{.}99$Direct Materials $($per unit$)$$$3\mathrm{.}78$$$23\mathrm{.}28$$$37\mathrm{.}16$$$4\mathrm{.}32$$$34\mathrm{.}04$Direct Labour $($per unit$)$$$8\mathrm{.}91$$$11\mathrm{.}01$$$22\mathrm{.}79$$$1\mathrm{.}88$$$12\mathrm{.}78$Variable Overhead $($per unit$)$$$3\mathrm{.}24$$$3\mathrm{.}24$$$3\mathrm{.}24$$$3\mathrm{.}24$$$3\mathrm{.}24$Variable Sales $($per unit$)$$$3\mathrm{.}00$$$7\mathrm{.}50$$$11\mathrm{.}25$$$1\mathrm{.}20$$$19\mathrm{.}50$Fixed Overhead $($per year$)$$$977,500$$$1,437,500$$$1,150,000$$$725,000$$$2,156,250$Fixed Sales Expenses $($per year$)$$$125,000$$$125,000$$$125,000$$$125,000$$$375,000$Production Minutes $($per unit$)11610830$Production Hours $($per unit$)0\mathrm{.}0170\mathrm{.}2670\mathrm{.}1670\mathrm{.}1330\mathrm{.}500$Total Production Hours Available$61,200$ Note to Students The above chart can be copied and pasted directly into MS Excel, so you do not have to re$-$create the entire chart. Appendix III Notes$$ The marketing department has used the anticipated demand to forecast their $2023$ sales units$$ Jason would like this analyzed for five years $(2024-2028)$ Jason has assumed that variable $2024$ forecasted numbers will increase by $5\%$ per year until $2028$ and fixed $2023$ forecasted numbers will increase by $3\%$ per year until $2028.$ If LSI is going to continue producing performance baseball apparel, he would like to spend $$20$M on January $01,2024,$ on a national advertising campaign explaining the benefits of LSI performance apparel. This would be a one$-$time cost.$$ Jason is positive that the LSI executives will want a break$-$even calculation for each of the products you recommend producing. This will be used as a part of Jasons recommendation to the LSI executives.$$ SG&A $=$ Sales, general and administrative.$$ The budgeted numbers are looking forward from $20242028,$ the numbers in Section $2$ Government Grant are actual numbers from $2023.$ These numbers are to be used in isolation and are completely independent of each other.$$ If it is decided that a department should not produce any products from $2024-2028$ due to capacity constraints, the Fixed Overhead costs will continue, however, the Fixed Sales Costs will not.