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Question 6 Simple Ltd operates a retail business. Purchases are sold at cost plus 33.33%. The following information on sales, labour costs and expenses relate to the firm: Additional information: i. It is management policy to have sufficient inventory in hand at the end of each month to meet half of the next month's sales demand. ii. Suppliers for materials and expenses are paid in the month after the purchases are madelexpenses incurred. iii. Labour is paid in full by the end of each month. iv. Expenses include a monthly depreciation charge of 3,000. v. 75% of sales are for cash 25% of sales are on one month's credit. vi. The company will buy equipment costing 18,000 for cash in February and pay a dividend of 25,000 in March. The opening cash balance on 1 February is 2,000. Required: a) Prepare a cash budget for February and March and comment on the result. 80 Marks b) Advise the management of Simple Ltd on how to deal with the deficit or surplus resulting from the cash budget prepared above. 20 Marks