What are the main issues and problems identified during the budgeting process and suggestions for improving the budget forecast. Dont explain how you prepared the budget. Analyze the issues, including profitability, cash needs, and cost structure. Suggest at least 3 ways you can improve the business forecast for the next 6 months to a year.
Heron, Inc Sales Budget For the mos ending June 10 Budged unit sales Selling price per unit Total Sales Nov 09 11,200 $ 10.00 $ S 1127500$ Dec '09 Jan '10 Feb '10 Mar 10 Apr '10 11,600 10,000 11,400 12,000 15 800 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 116,000 $100,000 $ 114,000 $ 120,000 $ 156 000 S May '10 June '10 6 mos total 18,000 22000 99.000 1125 $ 11.25 202,500 $ 247,500 $ 940,000 30% Cash Sales % Credit Sales % 70% $ Cash Sales Credit Sales Total Sales 33,750 $ 78,750 112,500 $ 34,800 $ 30,000 $ 34,200 $ 38,000 $ 46.800 S 81200 70.000 79,800 84000 109 200 116,000 $ 100,000 $ 114,000 $ 120,000 $ 156 000 S 80,750 $ 74,250 $ 282,000 141,750 $ 173 250 658,000 202,500 $ 247,500 S 940,000 S Current month AR Collections 1 month prior AIR Collections 2 months prior AVR Collections Uncolledible 30% 50% 18% 4% Heron, Inc Cash Collections For the 6 mos ending June 10 Current month cash Sales Current month AR Collections 1 month prior AR Collections 2 months prior AR Collections Total cash collections Jan 10 30,000 21,000 40,600 12,600 104,200 $ Feb 10 Mar '10 Apr 10 May 10 June 10 8 mos lotal 34,200 38,000 48,800 60 750 74 250 $ 282,000 23,940 25,200 32,760 42 525 51 975 S 197,400 35,000 39,900 42000 54 600 70 875 s 479,400 12,992 11,200 12,768 13 440 17 472 S 80,472 106,132 $ 112,300 $ 134 328 $ 171,315 $ 214572 S 842,847 3,150 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 Budged unil sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Nov 09 11,250 4,640 15,890 Dec '09 11,600 4,000 15,600 4,640 10960 Jan '10 10,000 4,560 14,560 4,000 10580 Feb '10 11,400 4.800 16,200 4,560 11640 Mar '10 12,000 6,240 18 240 4.800 13440 Apr '10 15 600 7200 22 800 6 240 16560 May 10 18,000 8,800 28,800 7,200 19600 June '10 22000 7200 29 200 8.900 20400 6 mos total 89,000 39,800 127,800 35,600 92200 $ Cost per unit Purchases 400 $ 43,840 S 4.00 $ 42,240 $ 400 $ 48,560 $ 420 $ 58,448 S 420 $ 69.552 S 4.41 $ 441 86,436 $ 89.964 391,200 % Paid in Month of Purchase % Paid in Month after Purchase 40% 60% Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June 10 Jan '10 Cash purchases 16,896 s 1 month prior AJP Collections 26,304 Cash disbursements for merchandise purch 5 43,2005 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 18,624 $ 22,579 $ 27,821 $ 34,574 $ 35,986 $ 156,480 25,344 27,936 33,869 41,731 51,862 207,046 43,968 5 50,5155 61,690 5 76,306 $ 87,8475 363,526 7% 6% Fixed Operaling 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 Reven 2,000 24,000 24,000 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 expense $ 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 $ Feb 10 Mar '10 Apr '10 May '10 June 10 6 mos total 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 18,000 7,980 8,400 10.920 14,175 17,325 65,800 8,000 8,000 8,000 8,000 8.000 48,000 6,840 7,200 9,360 12,150 14,850 56,400 2.000 2,000 2,000 2.000 2.000 12.000 24,000 24,000 24,000 24,000 24,000 144,000 24,000 24,000 24,000 24,000 24,000 144,000 3.248 2,800 3,192 3,360 4.368 20.118 79,068 79,400 84 472 90,685 97,543 509,318 24,000 24,000 24,000 24,000 24,000 144,000 3,248 2.800 3,192 3,360 4,368 20.118 51 820 $ 52,600 $ 57,280$ 63,325 $ 69,1755 344,200 Equipment payment - January Equipment payment - February Didends - March Minimum Monthly Cash Budget 50 000 30,000 12.000 15,000 5 Heron, Inc. Cash Budget For the 6 mos ending June 10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June 10 6 mos total 15,000 S 15,000 $ 15,344 $ 15,529 $ 15,887 S 15,572 $ 92.332 104,200 106.132 112.300 134,328 171,315 214,572 $ 842.847 119,200 121.132 127,644 149,857 187,202 230,144 $ 935, 179 98 99 100 101 102 103 Cash balance, beginning $ 104 Add collections from customers 105 Total cash available 106 Less disbursements: 107 Cash disbursements for merchandise pur 108 Cash disbursements for operating expens 109 Equipment purchases 110 Dividends 111 Total cash disbursements 112 Excess of receipts over disbursements 113 Financing 114 Borrowing.note 115 Repayments-note 116 Total financing 117 Cash balance, ending $ 118 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 5 69,175 $ S $ 157,022 5 73,121 5 363,526 344,200 80,000 12.000 799.726 135.453 143,200 (24,000) 12.000 115,115 12.529 125.788 (4,656) 118,970 30,887 139,631 47,572 39,000 20.000 3,000 62.000 62,000 39,000 15,000 $ 20.000 15,344 $ 3,000 15,529 $ 15,000 (15,000) 15,887 $ 32,000 (32,000) 15,572 S $ 15,000 $ (15,000) 5 58,121 $ 135,453 119 Total 940,000 375,448 564,552 508,318 56 234 120 Heron, Inc. 121 Budgeted Income Statement 122 For the 6 mos ending June 10 123 124 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June 10 125 Sales, net $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 S 247,500 $ 126 Cost of goods sold: 40,000 45,600 49.440 65,520 77,868 97,020 $ 127 Gross margin $ 60,000 $ 68,400 $ 70,560 $ 90,480 $ 124,632 S 150,480 $ 128 Total operating expenses 77,150 79,068 79.400 84,472 90,685 97,543 $ 129 Net Income $ (17,150) 5 (10 668) $ (8.840) $ 6,008 5 33,9475 52,937 $ 130 131 Heron, Inc. 132 Budgeted Balance Sheet 133 6/30/2010 134 135 Assets 136 Current Assets 137 Cash $ 58,121 138 Accounts receivable 149,625 139 Supplies 2.000 140 Merchandise Inventory 31,752 S 241,498 141 Plant and Equipment 142 Buildings and Equipment 1,050,000 143 Accumulated Depreciation 670,475 S 379.525 144 Total assets S 621,023 145 146 Liabilities and Equity 147 Accounts payable S 53,978 148 Capital stock 200,000 149 Retained earnings 367,045 567,045 150 Total liabilities and equity S 621,023 FIFO Calculation Jan Feb Mar Apr Beg Inventory $ 16,000 $ 18,240 $ 19,200 $ 26,208 $ 30,240 $ 38,808 Beg Inventory - Units Purchases 4,000 $ 42,240 4,560 $ 46,560 4,800 $ 56,448 6,240 $ 69,552 7,200 $ 86,436 8,800 $ 89,964 Purchases - Units 10,560 $ 11,640 $ 13,440 $ 16,560 $ 19,600 $ 20,400 $ COGS 40,000 45,600 49,440 65,520 77,868 97,020 COGS - Ending Units Inventory 10,000 $ 18,240 11,400 $ 19,200 12,000 $ 26,208 15,600 $ 30,240 18,000 $ 38,808 22,000 $ 31,752 Ending Inventory - Units 4,560 4,800 6,240 7,200 8,800 7,200 May Jun Ending Inventory=Beg Inventory+Purchases-Cost of goods sold Heron, Inc Sales Budget For the mos ending June 10 Budged unit sales Selling price per unit Total Sales Nov 09 11,200 $ 10.00 $ S 1127500$ Dec '09 Jan '10 Feb '10 Mar 10 Apr '10 11,600 10,000 11,400 12,000 15 800 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 116,000 $100,000 $ 114,000 $ 120,000 $ 156 000 S May '10 June '10 6 mos total 18,000 22000 99.000 1125 $ 11.25 202,500 $ 247,500 $ 940,000 30% Cash Sales % Credit Sales % 70% $ Cash Sales Credit Sales Total Sales 33,750 $ 78,750 112,500 $ 34,800 $ 30,000 $ 34,200 $ 38,000 $ 46.800 S 81200 70.000 79,800 84000 109 200 116,000 $ 100,000 $ 114,000 $ 120,000 $ 156 000 S 80,750 $ 74,250 $ 282,000 141,750 $ 173 250 658,000 202,500 $ 247,500 S 940,000 S Current month AR Collections 1 month prior AIR Collections 2 months prior AVR Collections Uncolledible 30% 50% 18% 4% Heron, Inc Cash Collections For the 6 mos ending June 10 Current month cash Sales Current month AR Collections 1 month prior AR Collections 2 months prior AR Collections Total cash collections Jan 10 30,000 21,000 40,600 12,600 104,200 $ Feb 10 Mar '10 Apr 10 May 10 June 10 8 mos lotal 34,200 38,000 48,800 60 750 74 250 $ 282,000 23,940 25,200 32,760 42 525 51 975 S 197,400 35,000 39,900 42000 54 600 70 875 s 479,400 12,992 11,200 12,768 13 440 17 472 S 80,472 106,132 $ 112,300 $ 134 328 $ 171,315 $ 214572 S 842,847 3,150 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 Budged unil sales Add desired ending inventory Total needs Less Beginning Inventory Required Purchases Nov 09 11,250 4,640 15,890 Dec '09 11,600 4,000 15,600 4,640 10960 Jan '10 10,000 4,560 14,560 4,000 10580 Feb '10 11,400 4.800 16,200 4,560 11640 Mar '10 12,000 6,240 18 240 4.800 13440 Apr '10 15 600 7200 22 800 6 240 16560 May 10 18,000 8,800 28,800 7,200 19600 June '10 22000 7200 29 200 8.900 20400 6 mos total 89,000 39,800 127,800 35,600 92200 $ Cost per unit Purchases 400 $ 43,840 S 4.00 $ 42,240 $ 400 $ 48,560 $ 420 $ 58,448 S 420 $ 69.552 S 4.41 $ 441 86,436 $ 89.964 391,200 % Paid in Month of Purchase % Paid in Month after Purchase 40% 60% Heron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For the 6 mos ending June 10 Jan '10 Cash purchases 16,896 s 1 month prior AJP Collections 26,304 Cash disbursements for merchandise purch 5 43,2005 Feb '10 Mar '10 Apr '10 May '10 June '10 6 mos total 18,624 $ 22,579 $ 27,821 $ 34,574 $ 35,986 $ 156,480 25,344 27,936 33,869 41,731 51,862 207,046 43,968 5 50,5155 61,690 5 76,306 $ 87,8475 363,526 7% 6% Fixed Operaling 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 Reven 2,000 24,000 24,000 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 expense $ 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 $ Feb 10 Mar '10 Apr '10 May '10 June 10 6 mos total 3,000 $ 3,000 $ 3,000 $ 3,000 $ 3,000 $ 18,000 7,980 8,400 10.920 14,175 17,325 65,800 8,000 8,000 8,000 8,000 8.000 48,000 6,840 7,200 9,360 12,150 14,850 56,400 2.000 2,000 2,000 2.000 2.000 12.000 24,000 24,000 24,000 24,000 24,000 144,000 24,000 24,000 24,000 24,000 24,000 144,000 3.248 2,800 3,192 3,360 4.368 20.118 79,068 79,400 84 472 90,685 97,543 509,318 24,000 24,000 24,000 24,000 24,000 144,000 3,248 2.800 3,192 3,360 4,368 20.118 51 820 $ 52,600 $ 57,280$ 63,325 $ 69,1755 344,200 Equipment payment - January Equipment payment - February Didends - March Minimum Monthly Cash Budget 50 000 30,000 12.000 15,000 5 Heron, Inc. Cash Budget For the 6 mos ending June 10 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June 10 6 mos total 15,000 S 15,000 $ 15,344 $ 15,529 $ 15,887 S 15,572 $ 92.332 104,200 106.132 112.300 134,328 171,315 214,572 $ 842.847 119,200 121.132 127,644 149,857 187,202 230,144 $ 935, 179 98 99 100 101 102 103 Cash balance, beginning $ 104 Add collections from customers 105 Total cash available 106 Less disbursements: 107 Cash disbursements for merchandise pur 108 Cash disbursements for operating expens 109 Equipment purchases 110 Dividends 111 Total cash disbursements 112 Excess of receipts over disbursements 113 Financing 114 Borrowing.note 115 Repayments-note 116 Total financing 117 Cash balance, ending $ 118 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 5 69,175 $ S $ 157,022 5 73,121 5 363,526 344,200 80,000 12.000 799.726 135.453 143,200 (24,000) 12.000 115,115 12.529 125.788 (4,656) 118,970 30,887 139,631 47,572 39,000 20.000 3,000 62.000 62,000 39,000 15,000 $ 20.000 15,344 $ 3,000 15,529 $ 15,000 (15,000) 15,887 $ 32,000 (32,000) 15,572 S $ 15,000 $ (15,000) 5 58,121 $ 135,453 119 Total 940,000 375,448 564,552 508,318 56 234 120 Heron, Inc. 121 Budgeted Income Statement 122 For the 6 mos ending June 10 123 124 Jan '10 Feb '10 Mar '10 Apr '10 May '10 June 10 125 Sales, net $ 100,000 $ 114,000 $ 120,000 $ 156,000 $ 202,500 S 247,500 $ 126 Cost of goods sold: 40,000 45,600 49.440 65,520 77,868 97,020 $ 127 Gross margin $ 60,000 $ 68,400 $ 70,560 $ 90,480 $ 124,632 S 150,480 $ 128 Total operating expenses 77,150 79,068 79.400 84,472 90,685 97,543 $ 129 Net Income $ (17,150) 5 (10 668) $ (8.840) $ 6,008 5 33,9475 52,937 $ 130 131 Heron, Inc. 132 Budgeted Balance Sheet 133 6/30/2010 134 135 Assets 136 Current Assets 137 Cash $ 58,121 138 Accounts receivable 149,625 139 Supplies 2.000 140 Merchandise Inventory 31,752 S 241,498 141 Plant and Equipment 142 Buildings and Equipment 1,050,000 143 Accumulated Depreciation 670,475 S 379.525 144 Total assets S 621,023 145 146 Liabilities and Equity 147 Accounts payable S 53,978 148 Capital stock 200,000 149 Retained earnings 367,045 567,045 150 Total liabilities and equity S 621,023 FIFO Calculation Jan Feb Mar Apr Beg Inventory $ 16,000 $ 18,240 $ 19,200 $ 26,208 $ 30,240 $ 38,808 Beg Inventory - Units Purchases 4,000 $ 42,240 4,560 $ 46,560 4,800 $ 56,448 6,240 $ 69,552 7,200 $ 86,436 8,800 $ 89,964 Purchases - Units 10,560 $ 11,640 $ 13,440 $ 16,560 $ 19,600 $ 20,400 $ COGS 40,000 45,600 49,440 65,520 77,868 97,020 COGS - Ending Units Inventory 10,000 $ 18,240 11,400 $ 19,200 12,000 $ 26,208 15,600 $ 30,240 18,000 $ 38,808 22,000 $ 31,752 Ending Inventory - Units 4,560 4,800 6,240 7,200 8,800 7,200 May Jun Ending Inventory=Beg Inventory+Purchases-Cost of goods sold
