Working session the alpha company

The Alfa company is a medium-sized company that is involved in the production of a single product,

We are going to follow the company through the different stages of its budgetary cycle.

All data in money terms are in thousand UAH.

The sales budget

As a result of the approved sales forecast, the company's sales in units for the year 2010 are expected to be 3,200. The company has set the unit sales price at 80,000 UAH.

On the basis of this information we can build up the sales budget

SCHEDULE 1 ALFA Company - 2010 Sales budget

	Quarter
	1	2	3	4	TOTAL
Expected sales in units	800	700	900	800	3,200
Unit sales (price UAH)	80	80	80	80	80
Total sales (UAH)	64,000	56,000	72,000	64,000	256,000

In order to build up the schedule of expected cash collections, we now assume that 70 percent of each quarter sales is collected in the quarter of sale, that 28% is collected in the following quarter, and that 2% is uncollectible.

SCHEDULE 1 ALFA Company - 2010 Expected cash collections

	Quarter
	1	2	3	4	TOTAL
Accounts receivable as of Dec.31, 2009	9,500				9,500
1st quarter sales	44,800	17,920			62,720
2d quarter sales		39,200	15,680		54,880
3d quarter sales			50,400	20,160	70,560
4th quarter sales				44,800	44,800
Total cash collections	54,300	57,120	66,080	64,960	242,460

The production budget

The staring point of the production budget is the number of units expected to be sold (see Schedule 1).

N.B. The number of units expected to be manufactured to meet the budgeted sales and inventory is calculated by subtracting the estimated inventory at the beginning of the period from the sum of units to be sold plus desired ending inventory.

Assume that the ending inventory in each quarter is 10 % of next quarter's sales and that ending inventory for the fourth quarter is 100 units.

SCHEDULE 2 ALFA Company - 2010 Production budget

	Quarter
	1	2	3	4	TOTAL
Planned sales Desired ending inventory
Total needs less beginning inventory
Units to be produced