5. June 6. Joshua Martinez, an old friend of yours from campus, Is the director of PowerFlex Ltd, a company that sells bodybuilding supplements. He has written the following letter to you: "Dear Jayde. I would like to be able to improve my understanding of budgeting and be able to budget the cash flow of PowerFlex Lid for the next two months, but I did not really pay attention in Accounting at university so I need your help The following information is available: Depreciation on fixed assets amounts to R38 800 per annum 2. The factory rental amounts to R12 000 per month. Rental payments are made in the month after they are incurred. According to the lease agreement, there is a scheduled rental escalation of 5% for the month of May 3 On 31 May machinery was sold for R20 000, resulting in a profit of R300 The EFT was cleared on 4. Additional equipment was purchased in June for R100 000. A 50% deposit was paid on purchase and the rest of the balance owing will be paid over the next 3 months. Actual and budgeted sales are as follows: R Feb 320 000 March 360 000 April 400 000 May 420 000 380 000 July 360 000 Credit sales are estimated at 90% of total sales. Debtors are expected to settle their accounts as follows: 75% in the month of sale 25% in the month after sale (the next month) 7. Actual and budgeted purchases are as follows: R April 294 000 May 266 000 June 252 000 50% of the purchases are for cash. The remaining purchases are made on credit and are paid in the month after purchases. Variable selling and administration expenses for May and June are estimated to be R84 000 and R76 000 respectively and are paid when they are incurred. 9. The bank balance (overdraft) at 30 April was R4 000 Kindly. Joshua Martinez - CEO PowerFlex Ltd (end of letter) REQUIRED (a) Prepare a Cash budget for PowerFlex Ltd for May and June (15) (b) Provide a brief evaluation of the Cash budget for this two-month period. (2) NOTE: Show all workings clearly Work to the nearest R1 8