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 1st 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 following the template on page 307 in the textbook.
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).