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a) Provide an analysis of the results from the original cash budget. The analysis will include a discussion of the anticipated sales in relation to the estimated labor and materials, as well as the overall month to month surplus cash or loan needed and what appears to be attributing to the surplus or need. The analysis should also include a discussion of the implications for the business as presented in the results.(6 pts)

b) If management increases cash sales from 30% to 60%, what type of investment policy does this action typically reflect? What reasons would management have for increasing the anticipated cash sales? Explain and support your response to each question. (4 pts)

c) Using the data, explain how the changes to cash sales and target cash balance would impact the need for external funds each month. What are the potential advantages and disadvantages of implementing the actions without adjusting overall sales? Your response should include a discussion of the goals of cash management, the goal of each action individually, as well as the combined effect on the external funds needed. (4 pts)

2016 Input Data 15,000 $20,000 $3,000 $20,000 $5,000 $30,000$50,000 $ $40,000 $10,000 $10,000 $5,000 $15,000 $25,000 $40,000 $35,000$15,000 $7,000 $25,00038,000$30,000 Estimated labor and raw materials 3,000 $12,000 $14,000 $31,000 $29,000 $14,000 Collections during month after sale 90% Collections during second month after sale 10% Other cash receipt-Treasuries (Jun-16) $10,000 Other cash receipt-Tax refund (Dec-16) $1,000 Target cash balance (May thru Jan) $10,000 Target cash balance (Fob thru April) $6,000 Interest, rent and administrative expenses $3,000 Other cash disbursement-income tax payments (Sep-16) $2,500 Other cash disbursement -retire debt issue (Aug-16) $1,000 Other cash disbursement-retire loan (Jan-17) $25,000 Cash on hand (May 1, 2016) $12,000 Prepare a monthly cash budget for the next thirteen months Anticipated Sales Sales (gross) Cash sales 15,000 $20,000$30,000 $50,000$40,000 $20,000$10,000 4,500$6,000 $9,000 $15,000 200 $6,000 3,00 ,0$4,500$7,500 12,0000,00 $4,500 5,000 $15,000 $25,000 $40,000 $35,000 $15,000 Collections During 1st month after sale During 2nd month after sale Other cash receipts $9,450 $12,600$18,900 $31,500$25,200$12,600 $6,300 $3,150 $700 $9,450 $15,750$25,200 $22,050 350,007$2,800 1,050 1,40,1003,500 2,800 $1,400 $1,000 $10,000 Total Cash Receipts $4,50025,450$22,650 $35,300 45,60034,0$18,40010,200 $8,350 17,30028,800$37,450 $29,350 3,000 $25,00038,00300010,000S5,000$3,0002,0001 14,000$31,000 9,000 $14,000 Variable: Labor and raw materials Fixed: inteerst, rent, and admin expenses Other cash disbursements Total cash disbursements $7,000 $3,000 $3,00 $3,000 $3,000 $2,500 $3,000 3 3,0003.0003,0003,000 30 3,000 3,000 3,000 $6,000 $8,000 41,000 $34,000 $15,5008000 $6,000 $15,000 $42,000 $34,000 $32,000 $17,000 $10,000 ($1,500)(2,550) ($18,350) 1,300 30,10026,700$12,400 ($4,800) (33,650) (16,700)($3,200) 20,450 $19,3s0 $10,500 $7,95 ($10.400) ($9,100) $21,000 $47,700 $60.100 sss,300 $21,650 $4,950 s1.750 s22.200 s41.550 $1,000 $25,000 Cash Surplus (or Loan Requirement Cash gain (or loss) during the month Cash position at beginning of month Cash position at end of month Target cash balance ($10,000)($10,000) ($10,000) (10,000)($10,000 $10,000)($10,000) ($10,000) (,000)($6,000) ($6,00) ($10,000) Surplus cash or loan needed $500 ($2,050) $20,400) ($19,100) $11,000 ($2,050) ($20,400) ($19,100) SI 1,000 $37,700 $50.100 $45,300 SI 1,650 ($1,050) ($4,250) 16,200 31,550

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