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:
1. Sales Forecast and Budget..........
2. Cash Receipts budget................
3.…show more content… 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
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.