A cash budget helps an organization plan and control the movement of cash into and out of the company.

A cash budget helps an organization plan and control the movement of cash into and out of the company. It is important for an organization to have a good understanding of its cash needs in order to identify instances of cash idleness or shortage. Cash on hand allows the organization to make commitments to various stakeholders, including employees and suppliers. Idle cash represents missed opportunities to reinvest into the organization and to return value to shareholders.

You will create and use an Excel spreadsheet for your calculations for the problems below.

Gladiator Robotics
Read the information below and complete Parts I, II and III

The board of directors of Gladiator Robotics is considering whether or not to donate to a national robotics convention for high school students interested in technology and engineering. The company needs you to prepare a monthly cash budget to determine the available cash reserves for January, February, and March. Relevant data appear below.

October
actual November
actual December
actual January February March Sales $300,000 $325,000 $450,000 $310,000 $350,000 $400,000

All sales are on account. Collections are expected to be 60% in the month following the sale, 25% in the second month following the sale, and 10% in the third month following the sale. Five percent are deemed to be uncollectible.

The company sold equipment in February for $20,000 and received a dividend on investments of $4,000 in March.

Cash on hand as of January 1^st is $14,000.

Material purchases are as follows:

October November December January February March $80,000 $85,000 $105,000 $80,000 $88,000 $92,000

Material purchases are paid 50% in the month purchased and the remainder in the following month.

Other disbursements are paid in the month incurred.

January February March Labor and wages 150,000 185,000 215,000 Selling costs 62,000 68,000 78,000 G & A costs 30,000 31,000 38,000 Income taxes     32,000 Capital equipment 50,000

The company wants to maintain a cash balance at the end of each month of at least $10,000. It has a $250,000 line of credit at the bank and will borrow from the bank in order to maintain this balance.

Part I: Prepare a monthly cash budget for January, February, and March using the attached template.

Part II: Analyze the cash budget and make recommendations to the board of directors of Gladiator Robotics regarding your findings. Be specific regarding possible causes and remedies (if applicable).

Part III: What if any concerns do you have about the ability to make the donation? Also, do you have any concerns about cash on hand which might impact variable HR expenses such as recruitment costs or other commitments to employees including staffing, development or rewards? Be specific.

 ATTACHMENT PREVIEW Download attachment

October(actual)November(actual)December(actual)JanuaryFebruaryMarchExpected sales$300,000$325,000$450,000$310,000$350,000$400,000Cash receipts:Cash sales0%000Collection from sales:One month ago60%270000186000Two months ago25%81250Three months ago10%30000Bad debts5%100%Other cash receipts381250Beginning of month cash14000Total cash available395250Cash disbursements:Materials92500Labor and wagesSelling costsG & A costsIncome taxesCapital equipmentInterest expenseTotal cash disbursements384500Ending cash balance (deficiency)before borrowings/ (repayments)or (investments)/redemptions10750Bank borrowings/(repayments)(investments)/redemptions0Ending cash balance (deficiency)10750