INFORMATION FOR IMAGINE, INC. BUDGET PROJECT 1. Imagine, Inc. is a company that re-sellis one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Imagine, so Imagine has no manufacturing-related costs. 2. As of 11/19, each lawn chair costs Imagine S4 per unit. Imagine sells each chair for $10 per 3. The estimated sales (in units) are as follows: Year Month Sales (in units) 2019 November 11,250 2019 December 11,600 2020 January 10,000 2020 February 11.400 2020 March 12.000 2020 April 15,800 2020 May 18,000 2020 June 22.000 2020 July 18.000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2020. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2020. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2020. 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 (.e. have in ending inventory) 40% of the forecasted demand in units i.e., estimated sales) for the next month. Imagine 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 (1.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 January, Another payment of $30,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed below (see item 9). 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 an paid when incurred): INFORMATION FOR IMAGINE, INC. BUDGET PROJECT 1. Imagine, Inc. is a company that re-sellis one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Imagine, so Imagine has no manufacturing-related costs. 2. As of 11/19, each lawn chair costs Imagine S4 per unit. Imagine sells each chair for $10 per 3. The estimated sales (in units) are as follows: Year Month Sales (in units) 2019 November 11,250 2019 December 11,600 2020 January 10,000 2020 February 11.400 2020 March 12.000 2020 April 15,800 2020 May 18,000 2020 June 22.000 2020 July 18.000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2020. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2020. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2020. 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 (.e. have in ending inventory) 40% of the forecasted demand in units i.e., estimated sales) for the next month. Imagine 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 (1.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 January, Another payment of $30,000 is due in February. Depreciation on the equipment previously purchased is included in the overhead cost detailed below (see item 9). 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 an paid when incurred)
