I need help with 4-6
INFORMATION FOR STEVE, INC. BUDGET PROJECT 1. Steve, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Steve, so Steve has no manufacturing- related costs 2. As of 11/18, each lawn chair costs Steve $4 per unit. Steve sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 18 11,250 Dec 18 11,600 Jan 1910,000 Feb 1911,400 Mar 1912,000 Apr 1915,600 May 1918,000 June 19 22,000 July 1918,000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2019. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2019. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2019. 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 (ie, have in ending inventory) 40% of the forecasted demand in units (i.e., estimated sales) for the next month. Steve uses the first-in, first-out (FIFO) method in accounting for inventories For the 6 mos ending June '07 June '07 6 mos total 0 3 202,500 247,500 $940,000 $ 33,750 $34,800 $ 30,000 $ 34,200 $ 36,000 $ 46,800 $60,750 $ 74,250 S 282,000 7 6 $112,500 $ 116,000 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 247,500 940,000 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections For the 6 mos ending June .07 7 51,975 $ 197,400 70,875 $282,975 17472 $ 80.472 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections $ 104,200 $ 106,132 $ 112,300 $ 134,328 $ 171,315 $ 214,572 $ 842,847 Desired ending inventory % Purchase Budget For the 6 mos ending June '07 0 Add desired ending inventory 2 0 Less Beginning Inventory Required Purchases 6 0 For the 6 mos ending June '07 07 60,750 42,525 54,600 13,440 Jan '07 Mar 07 07 46,800 32,760 42,000 12,768 June '07 6 mos 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 30,000 21,000 40,600 12,600 $ 104,200 34,200 23,940 35,000 12,992 74,250 $ 282,000 51,975 $ 197,400 70,875 $ 282,975 80,472 214,572 $ 842,847 25,200 39,900 106,132 $ 112,300 2,800 17,472 134,328 S 171,315 Bad Debt Expense 3,248 3,360 4,368 40% Desired ending inventory % Steve, Inc. Purchase Budget For the 6 mos ending June '07 06 11,600 4,000 15,600 4,640 10,960 eb '07 Mar '07 ne '07 22,000 mos total 89,000 38,800 29,200 127,800 15,600 7,200 18,000 8,800 26,800 7,200 19,600 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases 10,000 4.560 12,000 6,240 18,240 4,800 13,440 4,800 16,200 4,560 11,640 7.200 4,640 15,890 4.000 10.560 6,240 16,560 8.800 20.400 92,200 Cost per unit Purchases 4.00 43,840 4.00 S4.00 S 4.20 $ 4.20 $ 42,240 46,560 S 56,448 $ 69,552 $ 4.41 S 4.41 86,436 $ 89,964 391,200 40% 60% % Paid in Month of Purchase % Paid in Month after Purchase Steve, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '07 Jan '07 Feb '07 Mar '07 May '07 June '07 r'07 6 mos total Cash purchases 1 month prior A/P Collections 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 Steve, Inc. Operating Expense Budget For the 6 mos ending June '07 Mar '07 Feb '07 May '07 6 mos total Jan '07 r'07 June '07 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 Steve, Inc Cash Budget '07 For the 6 mos ending June 6 mos total Feb '07 Mar '07 r '07 May '07 Jan '07 June '07 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 INFORMATION FOR STEVE, INC. BUDGET PROJECT 1. Steve, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Steve, so Steve has no manufacturing- related costs 2. As of 11/18, each lawn chair costs Steve $4 per unit. Steve sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 18 11,250 Dec 18 11,600 Jan 1910,000 Feb 1911,400 Mar 1912,000 Apr 1915,600 May 1918,000 June 19 22,000 July 1918,000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2019. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2019. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2019. 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 (ie, have in ending inventory) 40% of the forecasted demand in units (i.e., estimated sales) for the next month. Steve uses the first-in, first-out (FIFO) method in accounting for inventories For the 6 mos ending June '07 June '07 6 mos total 0 3 202,500 247,500 $940,000 $ 33,750 $34,800 $ 30,000 $ 34,200 $ 36,000 $ 46,800 $60,750 $ 74,250 S 282,000 7 6 $112,500 $ 116,000 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 247,500 940,000 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections For the 6 mos ending June .07 7 51,975 $ 197,400 70,875 $282,975 17472 $ 80.472 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections $ 104,200 $ 106,132 $ 112,300 $ 134,328 $ 171,315 $ 214,572 $ 842,847 Desired ending inventory % Purchase Budget For the 6 mos ending June '07 0 Add desired ending inventory 2 0 Less Beginning Inventory Required Purchases 6 0 For the 6 mos ending June '07 07 60,750 42,525 54,600 13,440 Jan '07 Mar 07 07 46,800 32,760 42,000 12,768 June '07 6 mos 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 30,000 21,000 40,600 12,600 $ 104,200 34,200 23,940 35,000 12,992 74,250 $ 282,000 51,975 $ 197,400 70,875 $ 282,975 80,472 214,572 $ 842,847 25,200 39,900 106,132 $ 112,300 2,800 17,472 134,328 S 171,315 Bad Debt Expense 3,248 3,360 4,368 40% Desired ending inventory % Steve, Inc. Purchase Budget For the 6 mos ending June '07 06 11,600 4,000 15,600 4,640 10,960 eb '07 Mar '07 ne '07 22,000 mos total 89,000 38,800 29,200 127,800 15,600 7,200 18,000 8,800 26,800 7,200 19,600 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases 10,000 4.560 12,000 6,240 18,240 4,800 13,440 4,800 16,200 4,560 11,640 7.200 4,640 15,890 4.000 10.560 6,240 16,560 8.800 20.400 92,200 Cost per unit Purchases 4.00 43,840 4.00 S4.00 S 4.20 $ 4.20 $ 42,240 46,560 S 56,448 $ 69,552 $ 4.41 S 4.41 86,436 $ 89,964 391,200 40% 60% % Paid in Month of Purchase % Paid in Month after Purchase Steve, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '07 Jan '07 Feb '07 Mar '07 May '07 June '07 r'07 6 mos total Cash purchases 1 month prior A/P Collections 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 Steve, Inc. Operating Expense Budget For the 6 mos ending June '07 Mar '07 Feb '07 May '07 6 mos total Jan '07 r'07 June '07 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 Steve, Inc Cash Budget '07 For the 6 mos ending June 6 mos total Feb '07 Mar '07 r '07 May '07 Jan '07 June '07 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
