ACCOUNTING 2302
Summer 2015 –
BUDGET PROJECT
Click Link Below To Buy:
Or
Visit www.hwcampus.com
Objective: To understand and apply the basic concepts of profit
planning.
Due date:
At the end of
class 13
Late submissions will be penalized 15 points and will be accepted no later than class 15
Grading: This project is worth 40 points.
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 Henron, 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.
- The budget templates
and this instruction sheet are located on the course materials page. Make sure you save the file to
excel and then open the file through Excel (not Internet Explorer).
- Check figures are also
located on the course materials page.
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
|
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 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
|
|
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, 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
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