Required: You need to prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2007 to June 30, 2007 for Henron, Inc (a fictional company). This project must include: 1. Sales Forecast and Budget.......... 2. Cash Receipts budget................ 3. Purchase budget........................ 4. Cash Purchases Disbursements budget..... 5. Operating Expense budget...... 6. Summary Cash budget............ 7. Budgeted Income Statement..... 8. Budgeted Balance Sheet............ Page 1 of 3 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 11/06, each lawn chair costs Heron $4 per unit. Henron sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 06 11,250 Dec 06 11,600 Jan 07 10,000 Feb 07 11,400 Mar 07 12,000 Apr 07 15,600 May 07 18,000 June 07 22,000 July 07 18,000 4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2007. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2007. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2007. 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. Heron 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 Page 2 of 3 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, 2006 is expected to be $15,000. In addition, there will be no notes payable as of this date. 12. See below the other Balance Sheet accounts with their expected balances as of December 31, 2006: ? Supplies..............................................$ 2,000 ? Property, Plant and Equipment...........1,050,000 ? Accumulated Depreciation................. 526,475 ? Common Stock................................... 200,000 ? Retained Earnings.............................. 322,811
Principles of Managerial Accounting Heron, Inc. Budget Project 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 Apr '10 May '10 June '10 6 mos total Feb '10 Mar '10 Apr '10 May '10 May '10 June '10 6 mos total Apr '10 May '10 June '10 6 mos total Apr '10 May '10 June '10 6 mos total Apr '10 May '10 June '10 Total June '10 6 mos total June '10 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 Heron, Inc. Cash Collections For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 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 For the 6 mos ending June '10 Nov '09 Dec '09 Jan '10 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. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Apr '10 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 Heron, Inc. Operating Expense Budget For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 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 For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 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 For the 6 mos ending June '10 Jan '10 Feb '10 Mar '10 Sales, net Cost of goods sold: Gross margin Total operating expenses Net Income Heron, Inc. Budgeted Balance Sheet 6/30/2010 Assets Current Assets: Cash Accounts receivable Supplies Merchandise Inventory Plant and Equipment: Buildings and Equipment Accumulated Depreciation Total assets Liabilities and Equity Accounts payable Capital stock Retained earnings Total liabilities and equity Page 1 of 1 Check Figures Henron Budget Project, 2010 Cash Receipts Budget Total Cash Receipts, January: $104,200 Total Cash Receipts, Jan - June: $842,847 Uncollectible, January: $ 3,150 Uncollectible, Jan - June: $ 20,118 Purchase Budget Total Purchases, Jan - June: $391,200 Cash Budget Total Cash Disbursements, Jan - June: $799,726 Ending Cash Balance, June: Budgeted Income Statement Operating Expenses, Total: Net Income, Total: Budgeted Balance Sheet Total Assets: $ 58,121 $508,318 $ 56,234 $621,023 Instruction Sheet Henron Budget Project, 2010 Objective: To understand and apply the basic concepts of profit planning. Required: 1. Prepare a comprehensive 6-month budget 2. Answer project discussion questions Budget Criteria: You will prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2010 to June 30, 2010 for Henron, Inc (a fictional company). This project must include: 1. 2. 3. 4. 5. 6. 7. 8. Sales Forecast and Budget Cash Collections budget Purchase budget Cash Purchases Disbursements budget Operating Expense budget Cash budget Budgeted Income Statement Budgeted Balance Sheet Notes and Hints: 1. You may print this instruction sheet. 2. The schedules/budgets must be prepared in Excel. The templates the instructor has prepared must be used as is. 3. Part of this project is demonstrating proper use of Excel. You may only input a \"hard number\" into a pink cell. All yellow cells must be formula based (no numbers included - use appropriate cell referencing). 4. The instructor recommends 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. Make your own copy of the budget template for use in this project. When you have finished the project you will submit this copy to the instructor for grading. Open the budget template link on the Midterm Project instruction page. Save a copy of the template to your computer by doing a \"Save As\" of the file. Include your last name and date in the file name. For example, Smith_091709. Make sure you open your template copy through Excel (not Internet Explorer) to begin work. 7. You may print a copy of the Check Figures document. The link for the document is located on the Midterm Project instruction page. Discussion Questions: 1. What are the threats to the sustainability of Heron's budget? What are your suggestions to reducing these threats? (List at least three) 2. Which \"estimates\" could impact profit? How would they increase or decrease profit? (List at least three) 3. This forecast is for a six-month period. Would you extend this forecast to cover a longer period of time? Why or why not? If you extended the period, how long would you extend it? Why? Information For Henron, 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 11/09, each lawn chair costs Heron $4 per unit. Henron sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 June 10 July 10 11,250 11,600 10,000 11,400 12,000 15,600 18,000 22,000 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. Heron 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 Sales Commissions Rent Other Variable Cash Expenses Supplies Expense: See note Other: See note $3,000 7% of sales revenue $8,000 6% of sales revenue $2,000 $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........... 1,050,000 Accumulated Depreciation................. 526,475 Common Stock................................... 200,000 Retained Earnings.............................. 322,811 Principles of Managerial Accounting Heron, Inc. Budget Project Name: Harrison Heron, Inc. Sales Budget For the 6 mos ending June '10 Nov '09 11,250 $10.00 $112,500 Budged unit sales Selling price per unit Total Sales Cash Sales % Credit Sales % Dec '09 11,600 $10.00 $116,000 Jan '10 10,000 $10.00 $100,000 Feb '10 11,400 $10.00 $114,000 Mar '10 12,000 $10.00 $120,000 Apr '10 15,600 $10.00 $156,000 May '10 18,000 $11.25 $202,500 $34,800 81,200 $116,000 $30,000 70,000 $100,000 $34,200 79,800 $114,000 $36,000 84,000 $120,000 $46,800 109,200 $156,000 $60,750 141,750 $202,500 June '10 6 mos total 22,000 89,000 $11.25 10.56 $247,500 $940,000 30% 70% Cash Sales Credit Sales Total Sales $33,750 78,750 $112,500 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Uncollectible $74,250 173,250 $247,500 $282,000 658,000 $940,000 30% 50% 16% 4% Heron, Inc. Cash Collections For the 6 mos ending June '10 Jan '10 30,000 21,000 40,600 12,600 $104,200 Feb '10 34,200 23,940 35,000 12,992 $106,132 Mar '10 36,000 25,200 39,900 11,200 $112,300 Apr '10 46,800 32,760 42,000 12,768 $134,328 May '10 60,750 42,525 54,600 13,440 $171,315 June '10 74,250 51,975 70,875 17,472 $214,572 6 mos total $282,000 $197,400 $282,975 $80,472 $842,847 3,150 Current month cash Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections 3,248 2,800 3,192 3,360 4,368 20,118 Bad Debt Expense Desired ending inventory % 40% Heron, Inc. Purchase Budget For the 6 mos ending June '10 Nov '09 11,250 4,640 15,890 Cost per unit Purchases % Paid in Month of Purchase % Paid in Month after Purchase Dec '09 11,600 4,000 15,600 4,640 10,960 Jan '10 10,000 4,560 14,560 4,000 10,560 Feb '10 11,400 4,800 16,200 4,560 11,640 Mar '10 12,000 6,240 18,240 4,800 13,440 Apr '10 15,600 7,200 22,800 6,240 16,560 May '10 18,000 8,800 26,800 7,200 19,600 $4.00 $43,840 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases $4.00 $42,240 $4.00 $46,560 $4.20 $56,448 $4.20 $69,552 $4.41 $86,436 May '10 $34,574 41,731 $76,306 June '10 $35,986 51,862 $87,847 6 mos total $156,480 207,046 $363,526 40% 60% Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '10 Cash purchases 1 month prior A/P Collections Cash disbursements for merchandise purch. Jan '10 $16,896 26,304 $43,200 Fixed Operating expenses: Salaries and Wages Rent Supplies Expense Other - Overhead Other - Depreciation Feb '10 $18,624 25,344 $43,968 Mar '10 $22,579 27,936 $50,515 Apr '10 $27,821 33,869 $61,690 Variable Operating Expenses: $3,000 Sales Commissions, % of Revenue 8,000 Other Variable Cash Expenses, % of Revenue 2,000 24,000 24,000 7% 6% Heron, Inc. Operating Expense Budget For the 6 mos ending June '10 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 Jan '10 $3,000 7,000 8,000 6,000 2,000 24,000 24,000 3,150 77,150 24,000 3,150 $50,000 Equipment payment - January Equipment payment - February Dividends - March Minimum Monthly Cash Budget Feb '10 $3,000 7,980 8,000 6,840 2,000 24,000 24,000 3,248 79,068 24,000 3,248 $51,820 Mar '10 $3,000 8,400 8,000 7,200 2,000 24,000 24,000 2,800 79,400 24,000 2,800 $52,600 Apr '10 $3,000 10,920 8,000 9,360 2,000 24,000 24,000 3,192 84,472 24,000 3,192 $57,280 May '10 $3,000 14,175 8,000 12,150 2,000 24,000 24,000 3,360 90,685 24,000 3,360 $63,325 June '10 $3,000 17,325 8,000 14,850 2,000 24,000 24,000 4,368 97,543 24,000 4,368 $69,175 6 mos total $18,000 65,800 48,000 56,400 12,000 144,000 144,000 20,118 508,318 144,000 20,118 $344,200 $50,000 $30,000 $12,000 $15,000 Heron, Inc. Cash Budget For the 6 mos ending June '10 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 Jan '10 $15,000 104,200 119,200 Feb '10 $15,000 106,132 121,132 Mar '10 $15,344 112,300 127,644 Apr '10 $15,529 134,328 149,857 May '10 $15,887 171,315 187,202 June '10 $15,572 214,572 230,144 6 mos total $92,332 $842,847 $935,179 43,200 50,000 50,000 43,968 51,820 30,000 50,515 52,600 61,690 57,280 76,306 63,325 87,847 69,175 143,200 (24,000) 125,788 (4,656) 12,000 115,115 12,529 118,970 30,887 139,631 47,572 157,022 73,121 $363,526 $344,200 $80,000 $12,000 $799,726 $135,453 39,000 39,000 $15,000 20,000 20,000 $15,344 3,000 3,000 $15,529 (15,000) (15,000) $15,887 (32,000) (32,000) $15,572 (15,000) (15,000) $58,121 $62,000 $(62,000) $135,453 Apr '10 $156,000 65,520 $90,480 84,472 $6,008 May '10 $202,500 77,868 $124,632 90,685 $33,947 June '10 $247,500 97,020 $150,480 97,543 $52,937 Total $940,000 $375,448 $564,552 $508,318 $56,234 Heron, Inc. Budgeted Income Statement For the 6 mos ending June '10 Jan '10 $100,000 40,000 $60,000 77,150 $(17,150) Sales, net Cost of goods sold: Gross margin Total operating expenses Net Income Feb '10 $114,000 45,600 $68,400 79,068 $(10,668) Mar '10 $120,000 49,440 $70,560 79,400 $(8,840) Heron, Inc. Budgeted Balance Sheet 6/30/2010 Assets Current Assets: Cash Accounts receivable Supplies Merchandise Inventory Plant and Equipment: Buildings and Equipment Accumulated Depreciation Total assets Liabilities and Equity Accounts payable Capital stock Retained earnings Total liabilities and equity $58,121 149,625 2,000 31,752 1,050,000 670,475 $241,498 $379,525 $621,023 $53,978 200,000 367,045 567,045 $621,023 Page 1 of 1 June '10 6 mos total 22,000 89,000 7,200 38,800 29,200 127,800 8,800 35,600 20,400 92,200 $4.41 $89,964 $391,200 Instruction Sheet Henron Budget Project, 2010 Objective: To understand and apply the basic concepts of profit planning. Required: 1. Prepare a comprehensive 6-month budget 2. Answer project discussion questions Budget Criteria: You will prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2010 to June 30, 2010 for Henron, Inc (a fictional company). This project must include: 1. 2. 3. 4. 5. 6. 7. 8. Sales Forecast and Budget Cash Collections budget Purchase budget Cash Purchases Disbursements budget Operating Expense budget Cash budget Budgeted Income Statement Budgeted Balance Sheet Notes and Hints: 1. You may print this instruction sheet. 2. The schedules/budgets must be prepared in Excel. The templates the instructor has prepared must be used as is. 3. Part of this project is demonstrating proper use of Excel. You may only input a \"hard number\" into a pink cell. All yellow cells must be formula based (no numbers included - use appropriate cell referencing). 4. The instructor recommends 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. Make your own copy of the budget template for use in this project. When you have finished the project you will submit this copy to the instructor for grading. Open the budget template link on the Midterm Project instruction page. Save a copy of the template to your computer by doing a \"Save As\" of the file. Include your last name and date in the file name. For example, Smith_091709. Make sure you open your template copy through Excel (not Internet Explorer) to begin work. 7. You may print a copy of the Check Figures document. The link for the document is located on the Midterm Project instruction page. Discussion Questions: 1. What are the threats to the sustainability of Heron's budget? What are your suggestions to reducing these threats? (List at least three) 2. Which \"estimates\" could impact profit? How would they increase or decrease profit? (List at least three) 3. This forecast is for a six-month period. Would you extend this forecast to cover a longer period of time? Why or why not? If you extended the period, how long would you extend it? Why? Information For Henron, 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 11/09, each lawn chair costs Heron $4 per unit. Henron sells each chair for $10 per unit. 3. The estimated sales (in units) are as follows: Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 June 10 July 10 11,250 11,600 10,000 11,400 12,000 15,600 18,000 22,000 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. Heron 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 Sales Commissions Rent Other Variable Cash Expenses Supplies Expense: See note Other: See note $3,000 7% of sales revenue $8,000 6% of sales revenue $2,000 $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........... 1,050,000 Accumulated Depreciation................. 526,475 Common Stock................................... 200,000 Retained Earnings.............................. 322,811 Principles of Managerial Accounting Heron, Inc. Budget Project Name: Harrison Heron, Inc. Sales Budget For the 6 mos ending June '10 Nov '09 11,250 $10.00 $112,500 Budged unit sales Selling price per unit Total Sales Cash Sales % Credit Sales % Dec '09 11,600 $10.00 $116,000 Jan '10 10,000 $10.00 $100,000 Feb '10 11,400 $10.00 $114,000 Mar '10 12,000 $10.00 $120,000 Apr '10 15,600 $10.00 $156,000 May '10 18,000 $11.25 $202,500 $34,800 81,200 $116,000 $30,000 70,000 $100,000 $34,200 79,800 $114,000 $36,000 84,000 $120,000 $46,800 109,200 $156,000 $60,750 141,750 $202,500 June '10 6 mos total 22,000 89,000 $11.25 10.56 $247,500 $940,000 30% 70% Cash Sales Credit Sales Total Sales $33,750 78,750 $112,500 Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Uncollectible $74,250 173,250 $247,500 $282,000 658,000 $940,000 30% 50% 16% 4% Heron, Inc. Cash Collections For the 6 mos ending June '10 Jan '10 30,000 21,000 40,600 12,600 $104,200 Feb '10 34,200 23,940 35,000 12,992 $106,132 Mar '10 36,000 25,200 39,900 11,200 $112,300 Apr '10 46,800 32,760 42,000 12,768 $134,328 May '10 60,750 42,525 54,600 13,440 $171,315 June '10 74,250 51,975 70,875 17,472 $214,572 6 mos total $282,000 $197,400 $282,975 $80,472 $842,847 3,150 Current month cash Sales Current month A/R Collections 1 month prior A/R Collections 2 months prior A/R Collections Total cash collections 3,248 2,800 3,192 3,360 4,368 20,118 Bad Debt Expense Desired ending inventory % 40% Heron, Inc. Purchase Budget For the 6 mos ending June '10 Nov '09 11,250 4,640 15,890 Cost per unit Purchases % Paid in Month of Purchase % Paid in Month after Purchase Dec '09 11,600 4,000 15,600 4,640 10,960 Jan '10 10,000 4,560 14,560 4,000 10,560 Feb '10 11,400 4,800 16,200 4,560 11,640 Mar '10 12,000 6,240 18,240 4,800 13,440 Apr '10 15,600 7,200 22,800 6,240 16,560 May '10 18,000 8,800 26,800 7,200 19,600 $4.00 $43,840 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases $4.00 $42,240 $4.00 $46,560 $4.20 $56,448 $4.20 $69,552 $4.41 $86,436 May '10 $34,574 41,731 $76,306 June '10 $35,986 51,862 $87,847 6 mos total $156,480 207,046 $363,526 40% 60% Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '10 Cash purchases 1 month prior A/P Collections Cash disbursements for merchandise purch. Jan '10 $16,896 26,304 $43,200 Fixed Operating expenses: Salaries and Wages Rent Supplies Expense Other - Overhead Other - Depreciation Feb '10 $18,624 25,344 $43,968 Mar '10 $22,579 27,936 $50,515 Apr '10 $27,821 33,869 $61,690 Variable Operating Expenses: $3,000 Sales Commissions, % of Revenue 8,000 Other Variable Cash Expenses, % of Revenue 2,000 24,000 24,000 7% 6% Heron, Inc. Operating Expense Budget For the 6 mos ending June '10 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 Jan '10 $3,000 7,000 8,000 6,000 2,000 24,000 24,000 3,150 77,150 24,000 3,150 $50,000 Equipment payment - January Equipment payment - February Dividends - March Minimum Monthly Cash Budget Feb '10 $3,000 7,980 8,000 6,840 2,000 24,000 24,000 3,248 79,068 24,000 3,248 $51,820 Mar '10 $3,000 8,400 8,000 7,200 2,000 24,000 24,000 2,800 79,400 24,000 2,800 $52,600 Apr '10 $3,000 10,920 8,000 9,360 2,000 24,000 24,000 3,192 84,472 24,000 3,192 $57,280 May '10 $3,000 14,175 8,000 12,150 2,000 24,000 24,000 3,360 90,685 24,000 3,360 $63,325 June '10 $3,000 17,325 8,000 14,850 2,000 24,000 24,000 4,368 97,543 24,000 4,368 $69,175 6 mos total $18,000 65,800 48,000 56,400 12,000 144,000 144,000 20,118 508,318 144,000 20,118 $344,200 $50,000 $30,000 $12,000 $15,000 Heron, Inc. Cash Budget For the 6 mos ending June '10 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 Jan '10 $15,000 104,200 119,200 Feb '10 $15,000 106,132 121,132 Mar '10 $15,344 112,300 127,644 Apr '10 $15,529 134,328 149,857 May '10 $15,887 171,315 187,202 June '10 $15,572 214,572 230,144 6 mos total $92,332 $842,847 $935,179 43,200 50,000 50,000 43,968 51,820 30,000 50,515 52,600 61,690 57,280 76,306 63,325 87,847 69,175 143,200 (24,000) 125,788 (4,656) 12,000 115,115 12,529 118,970 30,887 139,631 47,572 157,022 73,121 $363,526 $344,200 $80,000 $12,000 $799,726 $135,453 39,000 39,000 $15,000 20,000 20,000 $15,344 3,000 3,000 $15,529 (15,000) (15,000) $15,887 (32,000) (32,000) $15,572 (15,000) (15,000) $58,121 $62,000 $(62,000) $135,453 Apr '10 $156,000 65,520 $90,480 84,472 $6,008 May '10 $202,500 77,868 $124,632 90,685 $33,947 June '10 $247,500 97,020 $150,480 97,543 $52,937 Total $940,000 $375,448 $564,552 $508,318 $56,234 Heron, Inc. Budgeted Income Statement For the 6 mos ending June '10 Jan '10 $100,000 40,000 $60,000 77,150 $(17,150) Sales, net Cost of goods sold: Gross margin Total operating expenses Net Income Feb '10 $114,000 45,600 $68,400 79,068 $(10,668) Mar '10 $120,000 49,440 $70,560 79,400 $(8,840) Heron, Inc. Budgeted Balance Sheet 6/30/2010 Assets Current Assets: Cash Accounts receivable Supplies Merchandise Inventory Plant and Equipment: Buildings and Equipment Accumulated Depreciation Total assets Liabilities and Equity Accounts payable Capital stock Retained earnings Total liabilities and equity $58,121 149,625 2,000 31,752 1,050,000 670,475 $241,498 $379,525 $621,023 $53,978 200,000 367,045 567,045 $621,023 Page 1 of 1 June '10 6 mos total 22,000 89,000 7,200 38,800 29,200 127,800 8,800 35,600 20,400 92,200 $4.41 $89,964 $391,200
