Cash budget Ken Dunlop of Dunlop's Dishes wishes to prepare a cash budget for the 6 months ending 30 June 2020 so he can arrange for overdraft drawings facilities, if required. The following information is available. 1. The business has consistently marked up its goods so as to realise a gross margin of 40% on sales. Policy is to have sufficient inventory on hand at the end of each month to cover the next 2 months sales. This was the situation at 31 December 2019, when the inventory was $160 500 (cost). 2. All sales are on credit. Debtors pay their accounts 50% in the month of sale and 50% in the following month. 3. All creditors are paid in the month following purchase. 4. The bank overdraft on 31 December 2019 was $10 800. Purchases in December of goods for resale amounted to $86 400. 5. Estimated quarterly payments to the ATO are to be made in January for $14 000 and in April for $6900. 6. Sales in November and December 2019 were $72 000 and $86 000 respectively. A growth of $14 000 per month is expected over the next 6 months. (GST has yet to be added to these amounts.) 7. The estimated payments for expenses are: Salaries $10 800 per month Administration $3300 per month Rent $19 800 for the year to 31 December 2019; this is to be paid as a lump sum in January 2020 8. On 1 January 2020, a new machine costing $90 000 is to be purchased and paid for. It is expected that this machine will last 10 years and have no resale value. All existing plant was scrapped during December 2019. . Required (a) Prepare a separate cash budget for each of the 6 months, January to June 2020. (b) Prepare the projected income statement for the 6 months ending 30 June 2020. (c) Explain the reasons for the difference between the projected profitability and the projected liquidity for the period. (LO5)