supply chain task 1 analysis Essay

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Supply Chain
Task 1
Deborah Genoway
Western Governors University
Mentor: Bob Carlson
ID: 000327447

B. 1.
A Pro Forma Financial Statement is a “Projected or estimated financial statement that attempts to present a reasonably accurate idea of what a firm's financial situation would be if the present trends continue or certain assumptions hold true.” (www.businessdictionary.com)
”A budget is defined as the formal expression of plans, goals, and objectives of management that covers all aspects of operations for a designated time period.” (Budgeting Basics)
By using the budgets and pro-forma statements, we were able to effectively begin the company with forecasting where certain moneys would be allocated. During the first quarter, AAAComputers began its business with $2 million; with this amount of capital a budget was set into place. During the initial phase of the budgeting process, a group was formed between upper management, mangers and sales personnel. Thus, a budget for expenses which we believed would occur in the future was then allocated to those departments. Meetings were then set to occur on a bi-weekly basis for the first quarter of the business startup, to discuss outcomes and the possibility if needed, of adjusting budgets. The master budget was initially set by the group, while a follow-up of the master budget set to occur once a month during the first quarter, with meetings tentatively scheduled for every month following the additional three quarters. Additional budgets were set up for the company as well including, financial, operating, cash, capital, and flexible budgets. A pro-forma statements were also set up using an Income Statement, Balance Sheet and Cash Flow statement, also taken into account were the short term and long term goals for the company which was projected. AAAComputers forecasted a demand of 8 units selling at a price of $5,000 each. The inventory at the end of the 2nd quarter was 0; this was due to poor planning on the company’s part to manufacture the microchips. There was lost sales of 30 units, due to the non-production of units within the 2nd quarter. The 2nd quarter proved to be a learning point for the company. By the 3rd quarter, AAAComputers made adjustments by ensuring adequacy of funds by using the pro forma statements to their forecasted demand to 128 units selling at a price of $5,000.00 per unit. The Company then produced 114 units and sold 89, with an ending inventory of 25 units. This was largely due to the using the pro forma statements from the first quarter. The 4th quarter did not project any units sold and was able to sell 4 of the units from the 25 left over in inventory from the 3rd quarter. This resulted in an ending inventory of 21 units. By using the Pro Forma Income Statements, the company did not manage their money and expenses well. While the company had revenue in the 2nd quarter, they failed to list the revenue on their pro-forma income statement, which produced a false number for the quarter. Based on the 3rd quarter pro forma statement, the company was bankrupt in the 4th quarter. The company did not adequately utilize the budgets along with the pro forma statements to decide if there were adjustments to be made. I did attempt to correct any mistakes I made during the review process using the pro forma statements and budgets to ensure I had an adequate amount of funds.
B. 2. A. Just in time or JIT is described as “An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.” (Investopedia.com) AAAComputers will utilize the JIT (just in time) inventory strategy. The JIT will only produce the inventory when the inventory was needed or required. The suppliers of the necessary components for the computers will be positioned so as to be at the closest distance for which the components can be acquired. The lean operations will
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