Nandalals Nursery in 1988, Nandalals family immigrated to Canada- he was 2 years old. His grandparents and parents pooled their money and invested in a plot of land located in the greater Vancouver area. They started working on the land, planting a variety of trees and shrubs. The plants and trees would grow to a substantial size then the family would sell them to local specialized gardening stores. They named the business after their youngest son Nandalal. Nandalals Nursery is a privately owned family-owned business that has been operating for over 30 years. The nursery specializes in growing and selling a variety of trees and shrubs to commercial customers. Over the years, Nandalals Nursery has experienced significant growth- this has resulted in increased competition and a need to manage costs more effectively. As Nandalals family has worked the land independently, it has become a sentimental part of their family and experience in Canada. With the assistance of a $10,000 loan from his parents, Nandalal graduated from UBC with a degree in Horticulture. He intends on repaying the amount, but his parents dont seem too concerned. Like his family members, Nandalal feels a strong connection to the land. He grew up amongst the Spruce and Douglas trees, spending many hot summer days helping his family continue to plant, raise, and harvest trees for sale. His older brother and father were always in charge of transport and his sister and mom had a knack for negotiations and paperwork. With his parents and grandparents aging and retiring, Nandalal is looking for a way to ensure that the nursery continues to be successful. He also wants to provide some funds for his parents and grandparents into their retirement. Beyond the initial incorporation of the business and 100 outstanding shares for $1 each in his dads name, the company hasnt altered its corporate structure. Over the years, the family has taken some cash out of the company to support themselves. Historically, the nursery has taken on very little debt and the family has no mortgage on the home located on the property. Nandalals sister, Inder, has recently mentioned that they need to have better business records and to declare dividends to help keep track of money coming in and out of the business. Nandalal doesnt really understand why his sister is occasionally raising this topic. The nursery started as a small business with just a few acres of the land used, but it has grown into a large operation- this has become taxing on the family. Some external family friend and members of the community have been helping maintain the 45 acres of the land. Nandalal is thinking of bringing on seasonal employees in the spring and summer to assist with these roles at an average hourly wage of $20 per hour. Alternatively, Nandalal can purchase some new machinery costing $18,000 with a useful life of 9 years to assist with these jobs in the spring and summer. The machinery would also be useful in the fall andNandalals Nursery winter to prepare the land for the next planting season. This machinery would replace 4 full time workers on the farm. The farm's current machinery is quite old. It was purchased second hand in 2018 for $12,000. It has a useful life of 10 years but needs continual maintenance every year costing an average of $3,000. The family thinks it can be sold for scrap metal for $4,500 today. The company has experienced a steady increase in sales, and its customer base has expanded to include more commercial clients, as well as some new residential clients who drive into the nursery with inquiries. Nandalals dad has been so busy he almost always turns them away. Nandalal estimates that residential customers would pay 70% more than the commercial customers do and would represent 25% of the total sales volume each year. As the company has grown, Inder has become increasingly aware of the need to manage costs more effectively. With increased competition and rising costs of inputs, the company needs to find ways to maintain its profitability. Inder continues to point out the importance of managerial accounting in helping them to make better business decisions, but Nandalal prefers the physical work and harvesting trees over running the business. Nandalal, Inder, and their older brother Mandeep have decided to reach out to you and your team to assist the company. It is a critical time as the company has matured, and the older generation is trying to transition away from the day-to-day operations. Inder is concerned that the current costing system used at Nandalals Nursery is not providing accurate cost information. The current system assigns overhead costs based on the number of trees sold, which Inder believes does not accurately reflect the actual costs of producing and selling the trees. The business needs recommendations about what to include in overhead allocation and how to develop a more accurate system. Manpreet has just started business school and keeps pushing that the company needs to do prepare a budget and compare results. He went through and prepared some preliminary numbers. Nandalal took one look and started scratching his head in confusion. Operations look fine, he assured his brother. Currently the business sells three types of trees and two types of shrubs. Nandalal is considering expanding the nursery's product mix to include a wider variety of trees and shrubs. They have asked you to analyze the costs and revenue associated with different products to determine which products are the most profitable.Nandalals Nursery Trees Time to Grow Sales Price Material Costs Labour Costs Current Douglas Fir 1.5 years $40.00 $0.50 $32.50 Vine Maple 2 years $90.00 $5.00 $20.00 Red Alder 2 years $20.00 $1.50 $22.50 Proposed Sitka Spruce 1 year $42.00 $2.00 $15.00 Weeping Willow 1.5 years $110.00 $8.00 $22.50 Shrubs Time to Grow Sales Price Material Costs Labour Costs Current Pacific Rhododendron 2 years $40.00 $0.80 $18.20 Salmonberry 0.5 years $12.00 $0.05 $0.55 Proposed Red Flowering Currant 0.5 years $160.00 $5.00 $45.00 Salal 1 year $12.00 $0.01 $4.99 Each plant takes up approximately the same physical space. Nandalal assumes that about 700 plants can be planted in each acre. Historically, there has been an even split between the three trees and two shrubs planted. Currently in January 2023, there are no plants in the nursery. Everything has been shipped off to local commercial clients and the family is seeking help to get the acreage ready for the next season. Looking at last Christmas, Nandalal saw a rise in interest for fresh cut Douglas Fir trees. Currently, the trees grown by the family are too small to be Christmas trees. Nandalal is thinking that instead of selling the trees as is, they should grow them for an additional year and sell them for a premium of $80. Nandalal estimates the direct labour costs would double, however the direct material would stay the same. In addition to Mandeeps inquiries regarding variances between budgeted and actual, Inder and Mandeep are curious what the current breakeven analysis would look like and if they can better improve their product mix. After the meeting with the family, Nandalal pulled your team aside and mentioned that he I considering a position with the City of Vancouver as a Landscape Designer for $82,000. He believes he can hire some outside help to run things with Inder and Manpreet. Then, he would be free to potentially earn more money working for the City but he isnt sure. He wants the team to help him make the right decision.Nandalals Nursery Prepare a business report for Nandalals Nursery, providing specific, detailed recommendations. Discuss all relevant issues, including pros and cons of each course of action. Outline any questions/inquiries which should be directed to Nandalal and his family and why the information is important to certain decisions. Nandalals Nursery Budgeted Actual Statement of Income For the year ended Dec. 31, 2022 For the year ended Dec. 31, 2022 Tree Sales $800,000 $820,000 Shrub Sales 400,000 390,000 Total Revenue 1,200,000 1,210,000 Cost of Goods Sold Direct Material 72,000 71,500 Direct Labour 396,000 375,000 Manufacturing Overhead 252,000 283,500 Total 720,000 730,000 Gross Profit 480,000 480,000 Operating Expenses Administrative expenses 40,000 46,000 Utilities 50,000 55,000 Advertising 60,000 60,000 Bookkeeping 36,000 30,000 Property taxes 12,000 14,000 Transportation 75,000 90,000 Total Operating Expenses 273,000 295,000 Net Income 207,000 185,000