Perform the analysis (quantitative and qualitative)
WaterDogs Inc. Nikki Castle started making lifejackets for dogs in her basement part-time 10 years ago after getting a puppy. She wanted to go canoeing but was unable to find a suitable lifejacket for her puppy, so she spent a couple of days fabricating something herself. When Nikki got to the canoe club, she was flooded with inquiries about her puppys lifejacket, and she started taking orders. Ten years later, her company now has revenues of over $5,000,000 per year, and her lifejackets are sold in 45 different countries through her online store and in specialty pet stores across North America.
Before starting her business, WaterDogs, Inc., Nikki had been working in an insurance company as a clerk. She had always made her own clothes and had taken a few fashion design courses but did not have a business background. Beginning the company was chal- lenging, and over the first few years of getting her business going, Nikki also took a few online courses in business management and accounting. There were a couple of times that she thought the business wasn't going to make itespecially in the beginning when she experienced a lot of growth very quicklybut after six years she was confident enough with the organization to incorporate. She hires an accountant to look after the bookkeeping and goes through an audit each year, but doesn't feel as though the financial statements, and in particular the income statement, provide her with the right information for decision making. 2019 4,880,000 2020 4,320,000 2021 5,355,000 . Revenues...... Less cost of goods sold: Beginning inventory... Add: Cost of goods manufactured... Cost of goods available for sale... Less: Ending inventory...... Cost of goods sold..... Gross profit.. Less: Operating expenses. Selling and admin...... Operating income..... 2,600,000 3,230,000 5,830,000 3,520,700 2,309,300 2,570,700 3,520,700 5,322,917 3,650,000 4,175,000 7,170,700 9,497,917 5,322,917 7,399,828 1,847,783 2,098,089 2,472,217 3,256,911 1,608,000 962,700 1,587,000 1,614,700 885,211 1,642,211 Her income statements didn't seem to fit with what she felt the company was really doing. Yes, the company was growing, but not at the rate that the profit was demonstrating, Nikki thought. In particular, Nikki felt that 2020 had been a slump year, but the income statement doesn't seem to reflect that. She dug up some additional information on the com- pany and was looking at it when she decided she needed an advisor to help her. She didn't have enough knowledge to be able to figure out what to do. 2018 2019 2020 2021 Units beginning inventory. 70,000 109,000 175,000 Units produced.. 90,000 100,000 120,000 145,000 Units sold... 61,000 54,000 63,000 Direct materials are $12 per unit, direct labour is $6 per unit, and variable manufactur- ing overhead is $3 per unit for each of the years. The company uses a FIFO inventory system. Before starting her business, WaterDogs, Inc., Nikki had been working in an insurance company as a clerk. She had always made her own clothes and had taken a few fashion design courses but did not have a business background. Beginning the company was chal- lenging, and over the first few years of getting her business going, Nikki also took a few online courses in business management and accounting. There were a couple of times that she thought the business wasn't going to make itespecially in the beginning when she experienced a lot of growth very quicklybut after six years she was confident enough with the organization to incorporate. She hires an accountant to look after the bookkeeping and goes through an audit each year, but doesn't feel as though the financial statements, and in particular the income statement, provide her with the right information for decision making. 2019 4,880,000 2020 4,320,000 2021 5,355,000 . Revenues...... Less cost of goods sold: Beginning inventory... Add: Cost of goods manufactured... Cost of goods available for sale... Less: Ending inventory...... Cost of goods sold..... Gross profit.. Less: Operating expenses. Selling and admin...... Operating income..... 2,600,000 3,230,000 5,830,000 3,520,700 2,309,300 2,570,700 3,520,700 5,322,917 3,650,000 4,175,000 7,170,700 9,497,917 5,322,917 7,399,828 1,847,783 2,098,089 2,472,217 3,256,911 1,608,000 962,700 1,587,000 1,614,700 885,211 1,642,211 Her income statements didn't seem to fit with what she felt the company was really doing. Yes, the company was growing, but not at the rate that the profit was demonstrating, Nikki thought. In particular, Nikki felt that 2020 had been a slump year, but the income statement doesn't seem to reflect that. She dug up some additional information on the com- pany and was looking at it when she decided she needed an advisor to help her. She didn't have enough knowledge to be able to figure out what to do. 2018 2019 2020 2021 Units beginning inventory. 70,000 109,000 175,000 Units produced.. 90,000 100,000 120,000 145,000 Units sold... 61,000 54,000 63,000 Direct materials are $12 per unit, direct labour is $6 per unit, and variable manufactur- ing overhead is $3 per unit for each of the years. The company uses a FIFO inventory system
