Alfa Company Management Accounting

Please answer all problems below.


The Alfa Company is preparing its master budgets for 2015.

Sales for the year are expected to total 1.200. 000units.Quartely sales are 20%, 25%, 30%, and 25% respectively. The sales price is expected to be $50 per unit for the first three quarters and $55 in the last quarter. Sales in the first quarter of 2000 are expected to be 10% higher than the budgeted sales volume of the first quarter of 2016.

Production.  Management desires to maintain ending finished inventory at 25% of the next quarter’s sales and beginning inventory 25% of the current quarter’s sales.

Direct Labor. Each unit needs 2 hours to be produced and each hour costs $10.

Required: Prepare Sales, Production and the Direct Labor budgets by quarters for 2015.


1. Ortega company has cash balance in January $46.000 and the following monthly data,

Accounts Receivable: January $80.000. February $150.000

Payments: January $40.000. February $65.000

Direct Labor: January $30. 000.February $40.000.

M/OH: January $18. 000.February $30.000 including $ 1000 depreciation.

Administrative expenses: January $20.000 February $15.000 including $ 1000 depreciation

Sales of marketable securities in January are $20.000 in cash and in February $5.000.

The company can borrow up to $15.000 and wants to maintain a minimum of $30.000 each month.

Prepare a cash budget for each month.


As a sales manager, Steve was given the following static report for selling expenses in Clothing department for the month of October.

Sales in units700010000 
Variable Expenses   
Sales Commissions21002600 
Total Variable cost   
Fixed expenses   
Sales Salaries10001000 
Office Salaries800800 
Total Fixed Cost   
Total Expenses   

Firstly, prepare the flexible budget given by the table above.
Secondly, based on this Steve was dismissed. So, he came to you for advice. Please explain by preparing a new flexible budget if management decision was correct. (To justify your opinion prepare a new flexible budget that should be compared with the current one)


Selling Price per unit$40
Direct Materials cost per unit$8
Direct Labor cost per unit$10
M/OH per unit$2
Operating expenses$50.000
Interest expense$5000
Tax factor25%

 Prepare a proforma Income Statement

PROBLEM 5  (Critical thinking and bonus 10 points)

In Geraldo Company it costs $40 per unit ($20 variable and $20 fixed) to make a product that sells for $45.A customer offers to buy 4.000 units at $25 per unit. Geraldo Company has $1 per unit extra variable cost. If the company has extra operating capacity, indicate the net income (loss) the company would have. (Incremental analysis)


Variable Expenses   
Cost of Goods Sold500.000450.000 
Selling and Administrative160.000156.000 
Contribution Margin?? 
Controllable Fixed Cost   
Sales Salaries   
Total Controllable Fixed Cost   
Controllable Margin   

From the information of the table above prepare a Responsibility report if the fixed rent cost of $300.000 is controlled by the manager by 50% and the fixed Sales salaries are controlled by 30% ..

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