3, (Budgeting) 25 Marks Higym Co's fiscal year begins on April 1. The following is an extract from a trial balance at May 31, 2019: Cash Accounts Receivable DR $3,500 CR $27,200 Bad Debt Allowance $2,240 Inventory Merchandise $16,000 Accounts Payable Merchandise $7,000 Data concerning company's purchase of merchandise inventory: Purchase price per unit $8 75% of any month's purchases ae payable in the month of purchase while the rest is due and paid for in the following month. At end of each month the company's policy is to have an inventory equal to 50% of the following month's unit sales. Sales Data: Selling price per unit April actual sales revenue May actual sales revenue June estimated sales revenue July estimated sales revenue $16 $32,000 $48,000 $64,000 $56,000 $800,000 Total sales expected in fiscal year 50% of billings are collected during the month of sale, 40% in the following month, 7% in the next following calendar month and 3% is uncollectable. Customers are allowed a 2% cash discount if payment is made by the end of the calendar month in which the sales took place. Selling and administrative expenses (exclusive of bad debt expenses): Total selling and admin expenses for fiscal year Total fixed selling & admin expenses for fiscal year (included in total) incurred evenly throughout the year Annual amortization expense (included in fixed selling and admin expense) $108,000 $24,000 $6,000 Variable selling and administrative expenses vary with sales revenue. Selling and administrative expenses are paid as incurred. Required: a) Prepare a cash budget for Higym Co for June 2019. b) Why are budgets important for organizations? c) What are some disadvantages when budgets are prepared based on top-down approach, instead of bottom-up approach