I need help with identifying the Issues and Problem Areas:Summarize the key weaknesses in the proposed budget, given the established pricing, inventory, receivable, payable, dividend and cash management policies. Strategies:Propose at least 3 changes to current policies that will address the weaknesses which you have identified.?Describe your reasoning for the suggestions you are making. For example, if you suggest raising the sales price in the off-season, why do you think it would make sense to the customer to pay more in January for a chair less likely to be used in the winter. ?Prepare at least 1 set of alternative budgets reflecting the outcomes of the strategies you are suggesting.?You must comment on the impact of your suggestions on cost structure, profitability and cash flows. ?You must assess the risks associated with your strategies and recognize the influence one set of suggestions will have on other parts of the budget. For example, what affect will increasing the sales price have on sales volume? Would the impact be the same throughout the year? How would you increase the volume? ?Try to incorporate some of the concepts we have covered so far in the class, such as contribution margin and break-even.?You should explain any strategies that you considered and rejected because they did not significantly improve the situation.ConclusionProvide a brief conclusion

Name: 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 1,600 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 11 12 Cash Sales % 30% 13 Credit Sales % 70% 14 15 Cash Sales $ 33,750 $ 34,800 $ 30,000 $ 34,200 $ 36,000 | $ 46,800 $ 60,750 $ 74,250 $ 282,000 16 Credit Sales 78,750 81,200 70,000 79,800 84,000 109,200 141,750 173,250 658,000 17 Total Sales $ 112,500 $ 116,000 $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 $ 247,500 $ 940,00 18 19 20 Current month A/R Collections 30% 21 1 month prior A/R Collections 50% 22 2 months prior A/R Collections 16% 23 Uncollectible 4% 24 25 Heron, Inc. 26 Cash Collections 27 For the 6 mos ending June '10 28 29 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 30 Current month cash Sales 30,000 34,200 36,000 46,800 60,750 74,250 282,000 31 Current month A/R Collections 21,000 23,940 25,200 32,760 42,525 51,975 197,400 32 1 month prior A/R Collections 40,600 35,000 39,900 42,000 64,600 70,875 282,975 33 2 months prior A/R Collections 12.600 12,992 11.200 12.768 13,440 17,472 80,472 34 Total cash collections $ 104,200 $ 106,132 $ 112,300 $ 134,328 $ 171,315 $ 214,572 $ 842.847 35 36 Bad Debt Expense 3,150 3,248 2,800 3,192 3,360 4,368 $ 20,118 37 38 Desired ending inventory % 40%40 Heron, Inc. 41 Purchase Budget 42 For the 6 mos ending June '10 43 44 Nov '09 Dec '09 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 45 Budged unit sales 11,250 11,600 10,000 11,400 12,000 15,600 18,000 22,000 89,000 46 Add desired ending inventory 4640 4.000 4560 4.800 6.240 7.200 8.800 7200 38,800 47 Total needs 15,890 15,600 14,560 16,200 8,240 22,800 26,800 29,200 127,800 48 Less Beginning Inventory 4.640 4,000 4,560 4,800 6,240 7,200 8,800 35,600 49 Required Purchases 10.960 10,560 ,640 13,440 560 19,600 20,400 92,200 50 51 Cost per unit 4.00 $ 4.00 $ 4.00 $ CA CA 4.20 $ 4.20 $ 4.41 $ 4.41 52 Purchases 43,840 $ 42,240 $ 46,560 $ 56,448 69,552 $ 86,436 $ 89,964 391,200 53 54 % Paid in Month of Purchase 40% 55 % Paid in Month after Purchase 60% 56 57 58 Heron, Inc. 59 Schedule of Budgeted Cash Disbursements for Merchandise Purchases 60 For the 6 mos ending June '10 61 62 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 63 Cash purchases $ 16,896 $ 18,624 $ 22,579 $ 27,821 $ 34,574 | $ 35,986 $ 156,480 64 1 month prior A/P Collections 26,304 25,344 27,936 33,869 41,731 51,862 207,046 cale 65 Cash disbursements for merchandise purch $ 43,200 $ 43,968 $ 50,515 $ 61,690 $ 76,306 | $ 87,847 363,526 66 67 68 Fixed Operating expenses: Variable Operating Expenses: 69 Salaries and Wages $ 3,000 Sales Commissions, % of Revenue 7% 70 Rent 8,000 Other Variable Cash Expenses, % of Revenue 6% 71 Supplies Expense 2,000 72 Other - Overhead 24,000 73 Other - Depreciation 24,000 7475 Heron, Inc. 76 Operating Expense Budget 77 For the 6 mos ending June '10 78 79 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 80 Salaries and Wages $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 ! $ 3,000 18,000 81 Sales Commissions 7,000 7,980 8,400 10,920 14,175 17,325 65,800 82 Rent 8,000 8,000 8,000 8,000 8,000 8,000 48,000 83 Other Variable Cash Expenses 6,000 6,840 7,200 9,360 12,150 14,850 56,400 84 Supplies Expense 2.000 2.000 2,000 2,000 2,000 2,000 12,000 85 Other - Overhead 24,000 24,000 24,000 24,000 24,000 24,000 144,000 86 Other - Depreciation 24,000 24,000 24,000 24,000 24,000 24,000 144,000 87 Bad Debt Expense 3.150 3,248 2,800 3,192 3,360 4,368 20,118 88 Total operating expenses 77,150 79,068 79,400 84,472 90,685 97,543 508,318 89 Depreciation and noncash items 24,000 24,000 24,000 24,000 24,000 24,000 144,000 90 Bad Debt Expense 3.150 3,248 2,800 3.192 3,360 4.368 CA CA CA 20,118 91 Cash disbursements for operating expenses $ 50,000 $ 51,820 $ 52,600 $ 57,280 $ 63,325 ! $ 69,175 344,200 92 93 Equipment payment - January 60,000 94 Equipment payment - February 30,000 95 Dividends - March 12,000 96 Minimum Monthly Cash Budget 15,000Heron, Inc. CO CO Cash Budget For the 6 mos ending June '10 01 02 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 03 Cash balance, beginning $ 15,000 $ 15,000 $ 15,344 $ 15,529 $ 15,887 $ 15,571 $ 92,331 04 Add collections from customers 104,200 106,132 112,300 134,328 171,315 214,572 $ 842,847 05 Total cash available 119,200 121,132 127,644 149,857 187,202 230,143 $ 935,178 06 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 09 Equipment purchases 50,000 30,000 80,000 10 Dividends 12,000 12,000 1 1 Total cash disbursements 143,200 125,788 115,115 118,970 139,631 157,022 799,726 12 Excess of receipts over disbursements (24,000) (4,656) 12,529 30,887 47,571 73,121 135,452 13 Financing: 14 Borrowing-note 39,000 20,000 3,000 62,000 15 Repayments-note (15,000) (32,000) (15,000) (62,000) 16 Total financing 39,000 20,000 3,000 (15,000) (32,000) 15,000) 0 17 Cash balance, ending $ 15,000 $ 15,344 $ 15,529 | $ 15,887 $ 15,571 $ 58,1219 135,452 18 19 20 Heron, Inc. 21 Budgeted Income Statement 22 For the 6 mos ending June '10 23 24 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June '10 Total 25 Sales, net $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 $ 247,500 $ 940,000 26 Cost of goods sold: 40,000 45,600 49,440 65,520 77,868 97,020 375,448 27 Gross margin $ 60,000 $ 68,400 $ 70,560 $ 90,480 $ 124,632 ! $ 150,480 $ 564,552 28 Total operating expenses 77,150 79,068 79,400 84,472 90,685 97,543 508,318 29 Net Income $ (17,150) $ (10,668) $ (8,840) $ 6,008 $ 33,947 | $ 52,937 $ 56,234 3031 Heron, Inc. 32 Budgeted Balance Sheet 33 6/30/10 34 35 Assets 36 Current Assets: 37 Cash 58,121 38 Accounts receivable 149,625 39 Supplies 2,000 40 Merchandise Inventory 31,752 $ 241,498 41 Plant and Equipment: 42 Buildings and Equipment 1,050,000 43 Accumulated Depreciation 670.475 379,525 44 Total assets 621,023 45 46 Liabilities and Equity 47 Accounts payable 53,978 48 Capital stock 200,000 49 Retained earnings 367.045 567.045 50 Total liabilities and equity 621,023 51 52 53 54