1 of 2 On January 1st, 2009, Mr. Joey Soprano plans to start, "Soprano's Laundry a small laundry business with 1,000 of his own money and a 15,000 loan from the bank. The interest charge on this bank loan is 12% per annum. Interest is payable half yearly in arrears. In January he will pay 15,000 for machinery, which will be depreciated at 15% per annum using the straight line method. He intends to buy materials on January 1st of 4,200 and from February 1st onwards purchases will be 4,740 per month. Monthly outflows in each of the first six months will include: Wages 1,600 Sundry Expenses 400 Trade suppliers will allow one month's credit. Mr. Soprano will take drawings of 920 per month. He will rent premises from January 1st for 50,000 per annum, payable quarterly in advance. Each month, cash sales will be 50% of total sales. Debtors will be allowed credit of two months. For those customers availing of the credit terms, it is estimated that 50% will pay on time, 35% will pay one month later, and the remainder will pay in the following month. Expected sales for the first six months are as follows: January February March April May June C2,200 4,800 5,600 7,400 8,200 10,400 Required: (a) Prepare a Monthly Cash Budget for the first six months of trading (24 marks) (b) Comment on why the creation of a cash budget is imperative for the efficient management of businesses. (9 marks)