1. Napoleon, Inc. is a company that re-sells one product, a particularly comfortable lawn chair. An overseas contractor makes the product exclusively for Napoleon, so Napoleon has no manufacturing-related costs.

2. As of 11/15, each lawn chair costs Napoleon $4 per unit. Napoleon sells each chair for $10 per unit.

3. The estimated sales (in units) are as follows:

Nov 15	11,250
Dec 15	11,600
Jan 16	10,000
Feb 16	11,400
Mar 16	12,000
Apr 16	15,600
May 16	18,000
June 16	22,000
July 16	18,000

4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2016. In addition, because of the increasing costs of plastic webbing, the cost is anticipated to increase by an additional 5% on May 1, 2016. To offset these increases, the company plans to raise the sales price to $11.25 per unit beginning May 1, 2016. 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. Napoleon 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 below (see item 9). 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, 2015, 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, 2015:
    • Supplies..................................................... $ 2,000
    • Property, Plant and Equipment....................... 1,050,000
    • Accumulated Depreciation................................. 526,475
    • Common Stock................................................ 200,000
    • Retained Earnings............................................. 322,811
    • Required: 
13. 
    
    • You need to prepare a comprehensive 6-month budget, including supporting schedules and a report for the period January 1, 2016 to June 30, 2016 for Napoleon, Inc (a fictional company). This project must include:
      1. Sales Forecast and Budget
      2. Cash Receipts budget
      3. Purchase budget
      4. Cash Purchases Disbursements budget
      5. Operating Expense budget
      6. Summary Cash budget
      7. Budgeted Income Statement
      8. Budgeted Balance Sheet
      9. A written Summary Report

    • 
      

      Notes and Hints

      
      

      The schedules/budgets must be prepared in Excel.

      
      

      Part of this project is demonstrating the proper use of Excel. You must include a copy of the formula version of the project or you will receive a 0 (zero).

      
      

      Rounding is encouraged and you may ignore interest and taxes.

      
      

      A written summary report, outlining the main issues and problems identified during the budgeting process and suggestions for improving the budget forecast. Don’t explain how you prepared the budget. Analyze the issues, including profitability, cash needs, and cost structure. Suggest at least 3 ways you can improve the business forecast for the next 6 months to a year. Test your suggestions by preparing the revised budget schedule. Attached is an example of a budget report.