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 2ALFA Company - 2010 Production budget
|
Quarter |
|
|||
|
1 |
2 |
3 |
4 |
TOTAL |
Planned sales Desired ending inventory |
800 70 |
700 90 |
900 80 |
800 100 |
3,200 100 |
Total needs less beginning inventory |
870 80 |
790 70 |
980 90 |
900 80 |
3,300 80 |
Units to be produced |
790 |
720 |
890 |
820 |
3,220 |