Required: You need to prepare a comprehensive 6-month budget, including supporti
ID: 2529341 • Letter: R
Question
Required: You need to prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2010 to June 30, 2010 for Gray, Inc (a fictional company). This project must include:
Sales Forecast and Budget..........
Cash Receipts budget................
Purchase budget........................
Cash Purchases Disbursements budget.....
Operating Expense budget......
Summary Cash budget............
Budgeted Income Statement.....
Budgeted Balance Sheet
INFORMATION FOR HENRON, INC. BUDGET PROJECT
1. Gray, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Gray, so Gray has no manufacturing-related costs.
2. As of 11/09, each lawn chair costs Gray $4 per unit. Gray sells each chair for $10 per unit.
3. The estimated sales (in units) are as follows:
Nov 09
11,250
Dec 09
11,600
Jan 10
10,000
Feb 10
11,400
Mar 10
12,000
Apr 10
15,600
May 10
18,000
June 10
22,000
July 10
18,000
4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2010. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2010. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2010. The sales forecast (i.e., estimated sales in units) takes this price increase into account.
5. Thirty percent of any month’s sales are for cash, and the remaining 70% are on credit. Thirty percent of the credit sales are collected in the month of sale, 50% are collected in the following month, and 16% are collected in the second month after the sale. The remaining receivables are deemed uncollectible. Bad debts are written off in the month the debt is deemed uncollectible (e.g. if the sale is made in January and is not collected by the end of March, it is written off in March.) No accrual for estimated bad debts is made in the month of sale.
6. The firm’s policy regarding inventory is to stock (i.e. have in ending inventory) 40% of the forecasted demand in units (i.e., estimated sales) for the next month. Gray uses the first-in, first-out (FIFO) method in accounting for inventories.
7. Forty percent of the inventory purchases are paid for in the month of purchase and the remaining 60% are paid in the following month (i.e. all of the previous month’s Accounts Payable are paid off by the end of any month.)
8. Per a prior contract, a cash payment of $50,000 for equipment previously purchased is due in January. Another payment of $30,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed in item 11 below. Also, dividends of $12,000 are to be paid in March.
9. Monthly operating expenses consist of the following (if these are cash expenses, they are paid when incurred):
Salaries and Wages
$3,000
Sales Commissions
7% of sales revenue
Rent
$8,000
Other Variable Cash Expenses
6% of sales revenue
Supplies Expense: See note
$2,000
Other: See note
$48,000
Note: Other general and administrative overhead is expected to be $48,000 per month. Of this amount, $24,000 represents depreciation and other non-cash expenses. The company maintains on hand one month’s worth of supplies.
10. The company must maintain a minimum cash balance of $15,000. Borrowing can make up shortfalls. For simplicity, assume that the bank will only lend (and accept repayments) in $1,000 increments. Ignore interest on the loan in your calculations, but minimize the amount borrowed and pay off any loans as soon as possible.
11. Cash on hand as of December 31, 2009 is expected to be $15,000. In addition, there will be no notes payable as of this date.
12. See below the other Balance Sheet accounts with their expected balances as of December 31, 2009:
· Supplies..............................................$ 2,000
· Property, Plant and Equipment...........1,000,000
· Accumulated Depreciation................. 526,475
· Common Stock................................... 200,000
· Retained Earnings.............................. 272,811
Nov 09
11,250
Dec 09
11,600
Jan 10
10,000
Feb 10
11,400
Mar 10
12,000
Apr 10
15,600
May 10
18,000
June 10
22,000
July 10
18,000
Search the Spring 2018 Comprehensive Problem.xlsx Excel Dylan Jones File Insert Draw Page Layout Formulas Data Review View Tell me what you want to do Share Home Arial General Paste Copy eo .0o Conditional Format as Cell Insert Delete Format 00 +. Blu. . 2.?. til Merge & Center. $. %, Sort &Find; & der Clear- ormatting Table Styls Filter Select Font Alignment Cells A1 Name: 1 Name Gray. Inc. Sales Budget For the 6 mos ending June 07 Nov 06 May '07 Dec '06 Jan '07 Feb '07 Mar '07 r '07 June 07 6 mos total 8 Budged unit sales 9 Selling price per unlt 10 Total Sales 12 Cash Sales % 13 Credit Sales % 14 1 Cash Sales 16 Credit Sales 17 Total Sales 18 19 20 Current month A/R Collections 21 1 month prior A/R Collections 22 2 months prior A/R Collections 23 Uncallectible 24 Gray, Inc. Cash Collections For the 6 mos ending June 07 27 28 Budget FIFO CalculationExplanation / Answer
Heron, Inc. Sales Budget For the 6 mos ending June '10 Nov '09 Dec '09 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Budged unit sales 11,250 11,600 10,000 11,400 12,000 15,600 18,000 22,000 89,000 Selling price per unit $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 11.25 $ 11.25 Total Sales $ 112,500 $ 116,000 $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 $ 247,500 $ 940,000 Cash Sales % 30% Credit Sales % 70% Cash Sales $ 33,750 $ 34,800 $ 30,000 $ 34,200 $ 36,000 $ 46,800 $ 60,750 $ 74,250 $ 282,000 Credit Sales 78,750 81,200 70,000 79,800 84,000 109,200 141,750 173,250 658,000 Total Sales $ 112,500 $ 116,000 $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 $ 247,500 $ 940,000 Current month A/R Collections 30% 1 month prior A/R Collections 50% 2 months prior A/R Collections 16% Uncollectible 4% Heron, Inc. Cash Collections For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Current month cash Sales 30,000 34,200 36,000 46,800 60,750 74,250 $ 282,000 Current month A/R Collections 21,000 23,940 25,200 32,760 42,525 51,975 $ 197,400 1 month prior A/R Collections 40,600 35,000 39,900 42,000 54,600 70,875 $ 282,975 2 months prior A/R Collections 12,600 12,992 11,200 12,768 13,440 17,472 $ 80,472 Total cash collections $ 104,200 $ 106,132 $ 112,300 $ 134,328 $ 171,315 $ 214,572 $ 842,847 Bad Debt Expense 3,150 3,248 2,800 3,192 3,360 4,368 $ 20,118 Desired ending inventory % 40% Heron, Inc. Purchase Budget For the 6 mos ending June '10 Nov '09 Dec '09 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Budged unit sales 11,250 11,600 10,000 11,400 12,000 15,600 18,000 22,000 89,000 Add desired ending inventory 4,640 4,000 4,560 4,800 6,240 7,200 8,800 7200 38,800 Total needs 15,890 15,600 14,560 16,200 18,240 22,800 26,800 29,200 127,800 Less Beginning Inventory 4,640 4,000 4,560 4,800 6,240 7,200 8,800 35,600 Required Purchases 10,960 10,560 11,640 13,440 16,560 19,600 20,400 92,200 Cost per unit $ 4.00 $ 4.00 $ 4.00 $ 4.20 $ 4.20 $ 4.41 $ 4.41 Purchases $ 43,840 $ 42,240 $ 46,560 $ 56,448 $ 69,552 $ 86,436 $ 89,964 391,200 % Paid in Month of Purchase 40% % Paid in Month after Purchase 60% Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Cash purchases $ 16,896 $ 18,624 $ 22,579 $ 27,821 $ 34,574 $ 35,986 $ 156,480 1 month prior A/P Collections 26,304 25,344 27,936 33,869 41,731 51,862 $ 207,046 Cash disbursements for merchandise purch. $ 43,200 $ 43,968 $ 50,515 $ 61,690 $ 76,306 $ 87,847 $ 363,526 Fixed Operating expenses: Variable Operating Expenses: Salaries and Wages $ 3,000 Sales Commissions, % of Revenue 7% Rent 8,000 Other Variable Cash Expenses, % of Revenue 6% Supplies Expense 2,000 Other - Overhead 24,000 Other - Depreciation 24,000 Heron, Inc. Operating Expense Budget For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Salaries and Wages $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 18,000 Sales Commissions 7,000 7,980 8,400 10,920 14,175 17,325 $ 65,800 Rent 8,000 8,000 8,000 8,000 8,000 8,000 $ 48,000 Other Variable Cash Expenses 6,000 6,840 7,200 9,360 12,150 14,850 $ 56,400 Supplies Expense 2,000 2,000 2,000 2,000 2,000 2,000 $ 12,000 Other - Overhead 24,000 24,000 24,000 24,000 24,000 24,000 $ 144,000 Other - Depreciation 24,000 24,000 24,000 24,000 24,000 24,000 $ 144,000 Bad Debt Expense 3,150 3,248 2,800 3,192 3,360 4,368 $ 20,118 Total operating expenses 77,150 79,068 79,400 84,472 90,685 97,543 508,318 Depreciation and noncash items 24,000 24,000 24,000 24,000 24,000 24,000 $ 144,000 Bad Debt Expense 3,150 3,248 2,800 3,192 3,360 4,368 $ 20,118 Cash disbursements for operating expenses $ 50,000 $ 51,820 $ 52,600 $ 57,280 $ 63,325 $ 69,175 $ 344,200 Equipment payment - January $ 50,000 Equipment payment - February $ 30,000 Dividends - March $ 12,000 Minimum Monthly Cash Budget $ 15,000 Heron, Inc. Cash Budget For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total Cash balance, beginning $ 15,000 $ 15,000 $ 15,344 $ 15,529 $ 15,887 $ 15,571 $ 92,331 Add collections from customers 104,200 106,132 112,300 134,328 171,315 214,572 $ 842,847 Total cash available 119,200 121,132 127,644 149,857 187,202 230,143 $ 935,178 Less disbursements: Cash disbursements for merchandise purch. 43,200 43,968 50,515 61,690 76,306 87,847 $ 363,526 Cash disbursements for operating expenses 50,000 51,820 52,600 57,280 63,325 69,175 $ 344,200 Equipment purchases 50,000 30,000 $ 80,000 Dividends 12,000 $ 12,000 Total cash disbursements 143,200 125,788 115,115 118,970 139,631 157,022 799,726 Excess of receipts over disbursements (24,000) (4,656) 12,529 30,887 47,571 73,121 135,452 Financing: Borrowing-note 39,000 20,000 3,000 $ 62,000 Repayments-note (15,000) (32,000) (15,000) $ (62,000) Total financing 39,000 20,000 3,000 (15,000) (32,000) (15,000) 0 Cash balance, ending $ 15,000 $ 15,344 $ 15,529 $ 15,887 $ 15,571 $ 58,121 $ 135,452 Heron, Inc. Budgeted Income Statement For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 Total Sales, net $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 $ 247,500 $ 940,000 Cost of goods sold: 40,000 45,600 49,440 65,520 77,868 97,020 375,448 Gross margin $ 60,000 $ 68,400 $ 70,560 $ 90,480 $ 124,632 $ 150,480 $ 564,552 Total operating expenses 77,150 79,068 79,400 84,472 90,685 97,543 508,318 Net Income $ (17,150) $ (10,668) $ (8,840) $ 6,008 $ 33,947 $ 52,937 $ 56,234 Heron, Inc. Budgeted Balance Sheet 30-06-10 Assets Current Assets: Cash $ 58,121 Accounts receivable 149,625 Supplies 2,000 Merchandise Inventory 31,752 $ 241,498 Plant and Equipment: Buildings and Equipment 1,000,000 Accumulated Depreciation 670,475 $ 329,525 Total assets $ 571,023 Liabilities and Equity Accounts payable $ 53,978 Capital stock 200,000 Retained earnings 317,045 517,045 Total liabilities and equity $ 571,023 FIFO Calculation Beg Inventory Beg Inventory - Units Purchases Purchases - Units COGS COGS - Units Ending Inventory Ending Inventory - Units Jan $ 16,000 4,000 $ 42,240 10,560 $ 40,000 10,000 $ 18,240 4,560 Feb $ 18,240 4,560 $ 46,560 11,640 $ 45,600 11,400 $ 19,200 4,800 Mar $ 19,200 4,800 $ 56,448 13,440 $ 49,440 12,000 $ 26,208 6,240 Apr $ 26,208 6,240 $ 69,552 16,560 $ 65,520 15,600 $ 30,240 7,200 May $ 30,240 7,200 $ 86,436 19,600 $ 77,868 18,000 $ 38,808 8,800 Jun $ 38,808 8,800 $ 89,964 20,400 $ 97,020 22,000 $ 31,752 7,200
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