Required: You need to prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2010 to June 30, 2010 for Gray, Inc (a fictional company). This project must include:

Sales Forecast and Budget..........

Cash Receipts budget................

Purchase budget........................

Cash Purchases Disbursements budget.....

Operating Expense budget......

Summary Cash budget............

Budgeted Income Statement.....

Budgeted Balance Sheet............

Notes and Hints

1. All 8 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 only input a hard number into a pink cell. All yellow cells must be formula based (no numbers included use appropriate cell referencing).

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.

INFORMATION FOR HENRON, INC. BUDGET PROJECT

1. Gray, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Gray, so Gray has no manufacturing-related costs.

2. As of 11/09, each lawn chair costs Gray $4 per unit. Gray sells each chair for $10 per unit.

3. The estimated sales (in units) are as follows:

Nov 09	11,250
Dec 09	11,600
Jan 10	10,000
Feb 10	11,400
Mar 10	12,000
Apr 10	15,600
May 10	18,000
June 10	22,000
July 10	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 months 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 firms 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. Gray 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 months 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
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 months 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...........1,000,000

Accumulated Depreciation................. 526,475

Common Stock................................... 200,000

Retained Earnings.............................. 272,811

Also, could you put down the formulas for each part on excel to walk me through the process of getting the correct answer.

Formulas needed

Gray, Inc. Purchase Budget For the 6 mos ending June '07 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Nov 06 11.250 4,500 15,750 Dec 06 11.600 4,640 16,240 4,500 11,740 Jan '07 10,000 4,000 14,000 4,640 9,360 Feb 07 11.400 4,560 15,960 4,000 11,960 Mar 07 12.000 4.800 16,800 4,560 12,240 Apr 07 15,600 6,240 21,840 4,800 17,040 May 07 18.000 7,200 25,200 6,240 18.960 June '07 22,000 8,800 30,800 7,200 23,600 6 mos total 89,000 35,600 124,600 31,440 93,160 Cost per unit Purchases 4.00 46,960 $ $ 4.00 37,440 $ $ 4.00 47,840 $ $ 4.20 51,408 $ $ 4.20 71,568 $ $ 4.41 $ 83,614 $ 4.41 104,076 40% % Paid in Month of Purchase % Paid in Month after Purchase 60% Gray, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '07 Jan 07 Feb 07 Mar '07 Apr 07 May 07 June '07 6mos 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: 3,000 Sales Commissions, % of Revenue 8,000 Other Variable Cash Expenses, % of Revenue 2,000 24,000 24,000 Gray, Inc. Operating Expense Budget For the 6 mos ending June 07 Jan 07 Feb 07 Mar 07 Apr 07 May 07 June 07 6 mos total 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 Gray, Inc. Cash Budget For the 6 mos ending June '07 Jan '07 Feb '07 Mar '07 Apr 07 May 07 June '07 6mos total Cash balance, beginning Add collections from customers Total cash available .ess 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 Gray, Inc. Budgeted Income Statement For the 6 mos ending June '07 Jan '07 Feb 07 Mar 07 Apr 07 May 07 June '07 Total Sales, net Cost of goods sold: Gross margin Total operating expenses Net Income Gray, Inc. Budgeted Balance Sheet 6/30/07 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 Gray, Inc. Purchase Budget For the 6 mos ending June '07 Budged unit sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Nov 06 11.250 4,500 15,750 Dec 06 11.600 4,640 16,240 4,500 11,740 Jan '07 10,000 4,000 14,000 4,640 9,360 Feb 07 11.400 4,560 15,960 4,000 11,960 Mar 07 12.000 4.800 16,800 4,560 12,240 Apr 07 15,600 6,240 21,840 4,800 17,040 May 07 18.000 7,200 25,200 6,240 18.960 June '07 22,000 8,800 30,800 7,200 23,600 6 mos total 89,000 35,600 124,600 31,440 93,160 Cost per unit Purchases 4.00 46,960 $ $ 4.00 37,440 $ $ 4.00 47,840 $ $ 4.20 51,408 $ $ 4.20 71,568 $ $ 4.41 $ 83,614 $ 4.41 104,076 40% % Paid in Month of Purchase % Paid in Month after Purchase 60% Gray, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June '07 Jan 07 Feb 07 Mar '07 Apr 07 May 07 June '07 6mos 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: 3,000 Sales Commissions, % of Revenue 8,000 Other Variable Cash Expenses, % of Revenue 2,000 24,000 24,000 Gray, Inc. Operating Expense Budget For the 6 mos ending June 07 Jan 07 Feb 07 Mar 07 Apr 07 May 07 June 07 6 mos total 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 Gray, Inc. Cash Budget For the 6 mos ending June '07 Jan '07 Feb '07 Mar '07 Apr 07 May 07 June '07 6mos total Cash balance, beginning Add collections from customers Total cash available .ess 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 Gray, Inc. Budgeted Income Statement For the 6 mos ending June '07 Jan '07 Feb 07 Mar 07 Apr 07 May 07 June '07 Total Sales, net Cost of goods sold: Gross margin Total operating expenses Net Income Gray, Inc. Budgeted Balance Sheet 6/30/07 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