You Need To Prepare A Comprehensive 6 Month Budget Including Supporting Schedules 3160458


Objective: To understand and apply the basic concepts of profit planning.

Grading: This project is worth 40 points.

Group/Individual assignment: This is a group assignment or individual assignment. If you choose to work in a group, you must evaluate your group members based upon their participation in the assignment. This evaluation must be turned in so that all group members receive the appropriate points. I recommend that you use the collaboration feature in Canvas to share documents if you choose to do the assignment as a group. Group size may not exceed 4 students.

Required: 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. SalesForecast and Budget
  2. Cash Receiptsbudget
  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

1. All 9 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). You must include a copy of the formula version of the project or you will receive a 0 (zero).

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.

  1. The budget templates and this instruction sheet are located on the budget project module. Make sure you save the file to excel and then open the file through Excel (not Internet Explorer).
  1. Check figures are also located on the budget project module.
  1. 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 revised budget schedule. Attached is an example of a budget report.


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


Dec 15


Jan 16


Feb 16


Mar 16


Apr 16


May 16


June 16


July 16


4. Per an existing contract, the cost of each chair is scheduled to increase by 5% on March 1, 2016. In addition, because of 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


Sales Commissions

7% of sales revenue



Other Variable Cash Expenses

6% of sales revenue

Supplies Expense: See note


Other: See note


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


To: L. Benson

From: J. Student(s)

Subject: January through June 2016 Budget

I have completed the budget for the first half of the next year and have produced the following analysis:

Issues and Problem Areas:

Summarize the key weaknesses in the proposed budget, given the established pricing, inventory, receivable, payable, dividend and cash management policies.


Propose at least 3 changes to current policies that will address the weaknesses which you have identified.

  • Describe your reasoning for the suggestions you are making. For example, if you suggest raising the sales price in the off-season, why do you think it would make sense to the customer to pay more in January for a chair less likely to be used in the winter.
  • Prepare at least 1 set of alternative budgets reflecting the outcomes of the strategies you are suggesting.
  • You must comment on the impact of your suggestions on cost structure, profitability and cash flows.
  • You must assess the risks associated with your strategies and recognize the influence one set of suggestions will have on other parts of the budget. For example, what affect will increasing the sales price have on sales volume? Would the impact be the same throughout the year? How would you increase the volume?
  • Try to incorporate some of the concepts we have covered so far in the class, such as contribution margin and break-even.
  • You should explain any strategies that you considered and rejected because they did not significantly improve the situation.


Provide a brief conclusion



Prof. Angela


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