ACCOUNTING FOR MANAGERS 6315 BUDGET PROJECT Objective: To understand and apply the basic concepts of profit planning in MS Excel. Due date: Check syllabus. Submission is via email. Grading: This project is worth 65 points. Required: You need to prepare a comprehensive 6-month budget in Excel, including supporting schedules and a report for the period January 1, 2014 to June 30, 2014 for Heron, Inc (a fictional company). Assume it is the beginning of the year. This project must include: 1. Sales Forecast and Budget.......... 2. Cash Receipts budget................ 3. Purchase budget........................ 4. Budgeted Inventory and Cost of Goods Sold 5. Cash Purchases Disbursements budget..... 6. Operating Expense budget...... 7. Summary Cash budget............ 8. Budgeted Income Statement..... 9. Budgeted Balance Sheet............ Notes and Hints 1. All 9 parts must be submitted before I grade the project. 2. The schedules/budgets must be prepared on Excel. The templates I have prepared must be used as is. 3. Part of this project is demonstrating proper use of Excel. You may input a ?hard coded number? into a pink cell or you can use a formula. All yellow cells must be formula based (no numbers included ? use appropriate cell referencing). A formula could be as simple as a reference to another cell in the worksheet. As a separate tab in Excel, you must include a copy of the formula version of the project or you will receive a 0 (zero). In MS Excel 2010, copy the worksheet as another tab and you just click on the Formulas tab at the top and then click on ?Show Formulas?. 4. I recommend constructing the formulas for one month and then copying the formulas over to the remaining months. 5. Rounding is encouraged and you may ignore interest and taxes. 6. The budget templates and this instruction sheet are located in Course Materials in Blackboard. Make sure you save the file to excel and then open the file through Excel (not Internet Explorer). 7. Check figures are also located on page 3. INFORMATION FOR HERON, INC. BUDGET PROJECT 1. Heron, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Heron; so, Heron has no manufacturing-related costs. 2. As of November, 2013, each lawn chair costs Heron $4 per unit. Heron currently sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 2013 11,250 Dec 2013 11,600 Jan 2014 10,000 Feb 2014 12,400 Mar 2014 13,000 Apr 2014 16,600 May 2014 18,000 June 2014 22,000 July 2014 18,000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on July 1, 2014. To offset this increase, the company plans to raise the sales price to $10.25 per unit beginning May 1, 2014. 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. 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. Equipment will be purchased in January requiring a cash payment of $55,000 due in January. Another payment of $30,000 is due in February. Also, dividends of $10,000 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 $3,500 Sales Commissions 7% of sales revenue Rent $9,000 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, 2013 was $15,000. In addition, there will be no notes payable as of this date. 12. See below the other Balance Sheet accounts with their balances as of December 31, 2013: ? Supplies..............................................$ 2,000 ? Property, Plant and Equipment........... 970,000 ? Accumulated Depreciation................. 526,475 ? Common Stock................................... 200,000 ? Retained Earnings.............................. 322,811 13. Check Figures 2014: Cash Receipts Budget Total Cash Receipts, January: $104,200 Total Cash Receipts, Jan ? June: $845,307 Uncollectible/bad debt exp, January: $3,150 Uncollectible/bad debt exp, Jan ? June: $20,958 Purchase Budget Total Purchases, Jan ? June: $380,800 Cash Budget Total Cash Disbursements, Jan ? June: $805,044 Ending Cash Balance, June: $55,263 Budgeted Income Statement Operating Expenses, Total: $516,858 Net Income, Total: $45,142 Budgeted Balance Sheet Total Assets: $606,913

ACCOUNTING FOR MANAGERS 6315 BUDGET PROJECT Objective: To understand and apply the basic concepts of profit planning in MS Excel. Due date: Check syllabus. Submission is via email. Grading: This project is worth 65 points. Required: You need to prepare a comprehensive 6-month budget in Excel, including supporting schedules and a report for the period January 1, 2014 to June 30, 2014 for Heron, Inc (a fictional company). Assume it is the beginning of the year. This project must include: 1. Sales Forecast and Budget.......... 2. Cash Receipts budget................ 3. Purchase budget........................ 4. Budgeted Inventory and Cost of Goods Sold 5. Cash Purchases Disbursements budget..... 6. Operating Expense budget...... 7. Summary Cash budget............ 8. Budgeted Income Statement..... 9. Budgeted Balance Sheet............ Notes and Hints 1. All 9 parts must be submitted before I grade the project. 2. The schedules/budgets must be prepared on Excel. The templates I have prepared must be used as is. 3. Part of this project is demonstrating proper use of Excel. You may input a \"hard coded number\" into a pink cell or you can use a formula. All yellow cells must be formula based (no numbers included - use appropriate cell referencing). A formula could be as simple as a reference to another cell in the worksheet. As a separate tab in Excel, you must include a copy of the formula version of the project or you will receive a 0 (zero). In MS Excel 2010, copy the worksheet as another tab and you just click on the Formulas tab at the top and then click on \"Show Formulas\". 4. I recommend constructing the formulas for one month and then copying the formulas over to the remaining months. 5. Rounding is encouraged and you may ignore interest and taxes. 6. The budget templates and this instruction sheet are located in Course Materials in Blackboard. Make sure you save the file to excel and then open the file through Excel (not Internet Explorer). 7. Check figures are also located on page 3. Page 1 of 3 INFORMATION FOR HERON, INC. BUDGET PROJECT 1. Heron, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Heron; so, Heron has no manufacturing-related costs. 2. As of November, 2013, each lawn chair costs Heron $4 per unit. Heron currently sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 2013 Dec 2013 Jan 2014 Feb 2014 Mar 2014 Apr 2014 May 2014 June 2014 July 2014 11,250 11,600 10,00 0 12,40 0 13,00 0 16,60 0 18,00 0 22,00 0 18,00 0 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on July 1, 2014. To offset this increase, the company plans to raise the sales price to $10.25 per unit beginning May 1, 2014. 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. 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. Equipment will be purchased in January requiring a cash payment of $55,000 due in January. Another payment of $30,000 is due in February. Also, dividends of $10,000 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 Sales Commissions Rent Other Variable Cash Expenses Supplies Expense: See note Other: See note $3,500 7% of sales revenue $9,000 6% of sales revenue $2,000 $48,000 Page 2 of 3 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, 2013 was $15,000. In addition, there will be no notes payable as of this date. 12. See below the other Balance Sheet accounts with their balances as of December 31, 2013: Supplies..............................................$ 2,000 Property, Plant and Equipment........... 970,000 Accumulated Depreciation................. 526,475 Common Stock................................... 200,000 Retained Earnings.............................. 322,811 13. Check Figures 2014: Cash Receipts Budget Total Cash Receipts, January: $104,200 Total Cash Receipts, Jan - June: $845,307 Uncollectible/bad debt exp, January: $3,150 Uncollectible/bad debt exp, Jan - June: $20,958 Purchase Budget Total Purchases, Jan - June: $380,800 Cash Budget Total Cash Disbursements, Jan - June: $805,044 Ending Cash Balance, June: $55,263 Budgeted Income Statement Operating Expenses, Total: Net Income, Total: $516,858 $45,142 Budgeted Balance Sheet Total Assets: $606,913 Page 3 of 3 Principles of Managerial Accounting Heron, Inc. Budget Project Name: Heron, Inc. Sales Budget (Schedule 1) For the 6 mos ending June '14 Nov '13 Dec '13 Jan '14 Feb '14 Mar '14 Apr '14 May '14 June '14 6 mos total Budged unit sales Selling price per unit Total Sales Cash Sales % Credit Sales % Cash Sales Credit Sales Total Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Uncollectible Hard coded numbers (can use formulas) Formulas Heron, Inc. Cash Receipts (Schedule 2) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Apr '14 May '14 June '14 6 mos total Feb '14 Mar '14 Apr '14 May '14 May '14 June '14 6 mos total May '14 June '14 6 mos total Apr '14 May '14 June '14 6 mos total Apr '14 May '14 June '14 6 mos total May '14 June '14 Total Current month cash Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections Bad Debt Expense Desired ending inventory % Heron, Inc. Purchase Budget (Schedule 3) For the 6 mos ending June '14 Nov '13 Dec '13 Jan '14 June '14 6 mos total Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Cost per unit Purchases % Paid in Month of Purchase % Paid in Month after Purchase Heron, Inc. Inventory and Cost of Goods Sold Calculation (Schedule 4) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Apr '14 Beginning Inventory- $ Purchases- $ Cost of Goods Sold- $ Ending Inventory- $ Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases (Schedule 5) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Apr '14 Cash purchases 1 month prior A/P Purchases Cash disbursements for merchandise purch. Fixed Operating expenses: Salaries and Wages Rent Supplies Expense Other - Overhead Other - Depreciation Variable Operating Expenses: Sales Commissions, % of Revenue Other Variable Cash Expenses, % of Revenue Heron, Inc. Operating Expense Budget (Schedule 6) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Salaries and Wages Sales Commissions Rent Other Variable Cash Expenses Supplies Expense Other - Overhead Other - Depreciation Bad Debt Expense Total operating expenses Depreciation and noncash items Bad Debt Expense Cash disbursements for operating expenses Equipment payment - January Equipment payment - February Dividends - March Minimum Monthly Cash Budget Heron, Inc. Cash Budget (Schedule 7) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Cash balance, beginning Add collections from customers Total cash available Less disbursements: Cash disbursements for merchandise purch. Cash disbursements for operating expenses Equipment purchases Dividends Total cash disbursements Excess of receipts over disbursements Financing: Borrowing-note Repayments-note Total financing Cash balance, ending Heron, Inc. Budgeted Income Statement (Schedule 8) For the 6 mos ending June '14 Jan '14 Feb '14 Mar '14 Apr '14 Sales, net Cost of goods sold (see Schedule 4) : Gross margin Total operating expenses Net Income Balance Sheet Accounts 12/31/13 Supplies Property, Plant & Equipment Accum. Depreciation Common Scock Retained Earnings Heron, Inc. Budgeted Balance Sheet (Schedule 9) 6/30/2014 Assets Current Assets: Cash (Schedule 7) Accounts Receivable (Calc from Sch 1) Supplies Merchandise Inventory (Schedule 4) Plant and Equipment: Buildings and Equipment (Sch 7 + yr 2013) Accumulated Depreciation (Sch 6 + yr 2013) Total assets Liabilities and Equity Accounts payable (Calc from Sch 3) Capital stock Retained earnings (Sch 7, Sch 8 + 2013) Total liabilities and equity Page 1 of 1