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Required: Construct a profit plan for the first 6 months for Shady Lady, Inc (a fictional company). Assume it is the beginning of the year. This project must include all of the following schedules:

1. Sales Forecast and Budget

2. Cash Receipts Budget

3. Purchase Budget

4. Budgeted Inventory and Cost of Goods Sold

5. Cash Purchases Disbursements Budget

6. Operating Expense Budget

7. Summary Cash Budget

8. Budgeted Income Statement

1. Shady Lady, Inc. is a company that re-sells one product, an extraordinarily large and colorful sun shade umbrella. An overseas contractor makes the product exclusively for Shady Lady; so, Shady Lady has no manufacturing-related costs.

2. As of 11/17, each sun shade umbrella costs Shady Lady $4 per unit. Shady Lady currently sells each umbrella for $10 per unit.

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

Nov 2017: 11,250

Dec 2017: 11,600

Jan 2018: 10,000

Feb 2018: 11,400

Mar 2018: 13,000

Apr 2018: 15,600

May 2018: 18,000

June 2018: 22,000

July 2018: 19,000

4. Per an existing contract, the cost of each umbrella is scheduled to increase by 10% on March 1, 2018. To offset this increase, the company plans to raise the sales price to $1.00 per unit beginning May 1, 2018. The sales forecast (i.e., estimated sales in units) takes this price increase into account.

5. Thirty percent of any months 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 firms policy regarding inventory is to stock (i.e. have in ending inventory) 50% of the forecasted demand in units (i.e., estimated sales) for the next month.

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 months Accounts Payable are paid off by the end of any month.)

8. Equipment will be purchased in January requiring a cash payment of $50,000 due in January. Another payment of $40,000 is due in February. Also, dividends of $13,000 are to be paid in March.

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9. Monthly operating expenses consist of the following (if these are cash expenses, they are paid when incurred):

Salaries and Wages $3,500 Sales Commissions 8% of sales revenue Rent $7,000 Other Variable Cash Expenses 5% of sales revenue Supplies Expense: See note $2,000 Other Overhead Exps: See note $46,000

Note: Other general and administrative overhead expenses are expected to be $46,000 per month. Of this amount, $25,000 represents depreciation, a non-cash expense. The company maintains on hand one months 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, 2017 was $15,000. In addition, there were no notes payable as of this date.

12. Check Figures 2018:

Cash Receipts Budget Total Cash Receipts, January: $104,200

Total Cash Receipts, Jan June: $845,892

Uncollectible/bad debt exp, January: $3,150

Uncollectible/bad debt exp, Jan June: $20,398

Purchase Budget

Total Purchases, Jan June: $406,640

Cash Budget Total Cash Disbursements, Jan June: $804,640

Ending Cash Balance, June: $56,252

Budgeted Income Statement

Operating Expenses, Total: $493,598

Net Income, Total: $61,562

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