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INFORMATION FOR HEDRON, INC. Hedron, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Ledrop, so Lledon, has no manufacturing related costs. PRODUCT COSTS In Nov of 2019, cach lawn chair costs Hedros $4 per unit. Per an existing contract, the cost of each chair is scheduled to increase by 5% on May 1, 2020. In addition, because of increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on Sept 1, 2020. PRODUCT SALES Hedoor sells cach chair for $10 per unit. Projected Sales units: Year 2019 Month Nov Dec 2020 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Amt 11,250 11,600 10,000 11,400 12,600 15,000 18,000 22.000 18,000 18,000 17,000 16,500 12.000 12.500 11,000 2021 To offset increasing costs of the chairs, the company plans to raise the sales price to $11.25 per unit beginning Sept 1, 2020. The sales forecast (i.c., estimated sales in units) takes this price increase into account. CREDIT SALES Monthly sales are 30% cash sales, 70% credit sales. 30% of credit sales are collected in the month of sale, 50% are collected the following month, and 16% are collected the 2nd month after sale. The remaining receivables are deemed uncollectible at the end of the 2nd month after sale. Bad debts are written off in the month the debt is deemed uncollectible PRODUCT INVENTORY The firm's policy regarding inventory is to maintain their stock (i.e. have in ending inventory) at 40% of the forecasted sales in units for the next month. HedFor uses the first in, first-out (FIFO) method in accounting for inventories. 40% of the inventory purchases are paid in the month of purchase with the remaining 60% paid the following month. EQUIPMENT A Note payment of $50,000 for equipment previously purchased is due in January and another Note payment of $30,000 is due in February. There are no Note Payables at the end of 2020 OPERATING EXPENSES Monthly Cash expenses are paid when incurred Salary and Wage Exp Sales Commissions Exp Rent Exp Gen & Admin Variable Exp Supplies Exp Gen & Admin Fixed Exp Gen & Admin Depreciation Exp $3,000 7% of sales revenue $8,000 6% of sales revenue $2,000 $24.000 $24.000 (Cash expenses are paid when incurred) CASH MANAGEMENT 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 loans, but minimize the amount borrowed and pay off any loans as soon as possible.) DIVIDENDS Dividends of $12,000 are paid in July BALANCE SHEET Balance Sheet balances as of December 31, 2019: Cash $ 15,000 Accounts Receivable $ 72,590 Supplies $ 2,000 Merchandise Inventory $ 16,000 Buildings and Equipment $ 1,050,000 Accumulated Depreciation $ 526,475 Accounts Payable $ 26,304 Notes Payable $ 80,000 Capital Stock $ 200,000 Retained Earnings $ 322,811 *same balance in 2020 CHECK FIGURES Cash Collections Budget Total Cash Receipts for January Total Cash Receipts, Total 2020: Bad Debt Exp for January: Bad Debt Exp. Total 2020: $ 104,200 $ 1,835,333 $ 3,150 $ 51,951 Purchase Budget Cost of Purchases for Dec 2020: $ 52,479 Operating Expense Budget Cash disbursements for Op Exp for Dec $ 55,281 Cash Budget Total cash available, Summary $ 1,850,333 Total Cash Disbursements, Summary: $ 1,549,658 Ending Cash Balance for Dec: $ 300,676 Budgeted Income Statement Gross Profit, Total: Cost of Goods Sold Total Net Income, Total: $ 1,134,388 $ 768,112 $ 103,113 Budgeted Balance Sheet Total Assets Dec 2020: $ 645,411 ONLY Pink Cells can contain a keyed-in number Yellow cells must only contain formula Hedron, Inc. Sales Budget For Year Ending Dec 31, 2020 Dec '18 Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 2 Annual Total Budged unit sales Selling price per unit Total Sales Cash Sales Credit Sales Cash Sales Credit Sales Total Sales Current month NR Collections 1 month prior AR Collections 2 months prior NR Collections Uncollectible Hedron, Inc. Cash Collections Budget For Year Ending Dec 31, 2020 Feb 20 Mar 20 Apr 20 Aug 2 Sep 2 Oct 2 Noy Dec2 Annual Total Current month cash Sales Current month AR Collections 1 month prior AR Collections 2 months prior AR Collections Total cash collections Bad Debt Expense Desired ending inventory Hedron, Inc. Purchase Budget For Year Ending Dec 31, 2020 Jul 2 Aug 20 Nov 1 Dec '18 Jan 20 Feb 2 Mar 28 day2 Jun 2 Sep 20 Nov 2 Dec 2 Summary Budged unit sales Add desired ending inventory Total unit needs Less Beginning Inventory Required Unit Purchases Cost per unit Cost of Purchases % Paid in Manth of Purchase % Paid in Month after Purchase Hedron, Inc. Schedule of Budgeted Cash Disbursements for Merchandise Purchases For Year Ending Dec 31, 2020 Jan 20 Feb 20 Mar 21 Apr 20 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 2 Annual Total Current purchases NP Payments 1 month prior AP Payments Cash disbursements for merchandise purchases Variable Operating Expenses: Sales Commission Exp % of Revenue Gen & Admin Variable Exp % of Revenue Fixed Operating expenses: Salary and Wage Exp Rent Exp Supplies Exp Gen & Admin Depreciation Exp Gen & Admin Fixed Exp Hedron, Inc Operating Expense Budget For Year Ending Dec 31, 2020 un 20 Feb 20 Mar 20 Apr 21 Jul 20 Aug 20 Sep 20 Oct 20 Nov 20 Dec 20 Annual Total Supples Exp Salary and Wage Exp Sales Commission Exp Rent Exp Gen & Admin Variable Exp Gen & Admin Fixed Exp Gen & Admin Depreciation Exp Bad Debt Exp Total Operating Exp Less: Depreciation Exp (noncash) Less: Bad Debt Exp (noncash) Cash Disbursements for Operating Expenses Note payment Equipment - January Note payment Equipment- February Dividends - July Minimum Monthly Cash Budget