Question

1. Heron, Inc. is a company that re-sells one product, a lawn chair. A contractor makes the product exclusively for Heron, so Heron has no manufacturing costs. Henron sells each chair for $10 per unit, but plans to raise the sales price to $11.00 per unit beginning May 1, 2018 2. The estimated sales (in units) are as follows: Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 12,000 13,000 9,000 10,000 13,000 15,000 18,000 18,000 17,000 3. They expect that 60% of any month’s sales are for cash, and the remaining 40% are on credit. Of the credit sales, they expect to collect 20% in the month of the sale, 70% in the following month, and 10% in the month after that. 4. The firm’s policy regarding inventory is to stock (i.e. have in ending inventory) 30% of the estimated sales for the next month. 5. Each lawn chair costs Henron $6. They plan to pay for 30% of the inventory purchases in the month of purchase, and pay the remaining 70% the following month (i.e. all of the previous month’s Accounts Payable are paid off by the end of any month.)

Henron, Inc.
Sales Budget
For the 6 mos ending June 30, 2018
	Nov 2017	Dec 2017	Jan 2018	Feb 2018	Mar 2018	Apr 2018	May 2018	Jun 2018	6 mos total
Budged unit sales
Selling price per unit
Total Sales Revenue
Cash Sales %	60%
Credit Sales %	40%

Answer 1

Solution:

Sales Budget For the 6 mos ending June 30, 2018
	Jan.2018	Feb.2018	March.2018	April.2018	May.2018	June.2018
Budgeted Unit Sales	9,000	10,000	13,000	15,000	18,000	18,000
Unit Selling Price	$10	$10	$10	$10	$10	$10
Budgeted Sales in dollars	$90,000	$100,000	$130,000	$150,000	$180,000	$180,000

Schedule of Cash Collection

Schedule of Cash Collection
	Jan.2018	Feb.2018	March.2018	April.2018	May.2018	June.2018
Cash Sales	$54,000	$60,000	$78,000	$90,000	$108,000	$108,000
Collection of Credit Sales
Nov 2017 Credit Sales	$4,800
Dec 2017 Credit Sales	$36,400	$5,200
Jan 2018 Credit Sales	$7,200	$25,200	$3,600
Feb 2018 Credit Sales		$8,000	$28,000	$4,000
March 2018 Credit Sales			$10,400	$36,400	$5,200
April 2018 Credit Sales				$12,000	$42,000	$6,000
May 2018 Credit Sales					$14,400	$50,400
June 2018 Credit Sales						$14,400
Total Estimated Cash Collection	$102,400	$98,400	$120,000	$142,400	$169,600	$178,800

Working note –

	Nov.2017	Dec.2017	Jan.2018	Feb.2018	March.2018	April.2018	May.2018	June.2018
Budgeted Unit Sales	12,000	13,000	9,000	10,000	13,000	15,000	18,000	18,000
Unit Selling Price	$10	$10	$10	$10	$10	$10	$10	$10
Budgeted Sales in dollars	$120,000	$130,000	$90,000	$100,000	$130,000	$150,000	$180,000	$180,000
Cash Sales @ 60%	$72,000	$78,000	$54,000	$60,000	$78,000	$90,000	$108,000	$108,000
Credit Sales @ 40%	$48,000	$52,000	$36,000	$40,000	$52,000	$60,000	$72,000	$72,000
20% Credit Sales collected in same month	$9,600	$10,400	$7,200	$8,000	$10,400	$12,000	$14,400	$14,400
70% credit sales collected in next month	$33,600	$36,400	$25,200	$28,000	$36,400	$42,000	$50,400	$50,400
10% credit sales collected in next month	$4,800	$5,200	$3,600	$4,000	$5,200	$6,000	$7,200	$7,200

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