Summer 2015 –
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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.
11. Cash on hand
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