Dogo is planning to open a retail shop on 1/5/2019. He would put in $25,000 cash as capital. He also has the following plans:

i) On 1/5/2019, to buy and pay for premises costing $20,000, furniture and fittings = $3,000 and motor vehicle = $1,000.

ii) To employ 2 assistants each to get a salary of $130 per month, to be paid at the end of each month (ignore PAYE tax and national insurance contribution).

iii) To buy the following goods (in units):

	May	June	July	August	September	October
Units	200	220	280	350	400	330

iv) To sell the following number of units:

	May	June	July	August	September	October
Units	120	180	240	300	390	420

v) Units will be sold for $10 each. One-third of the sales are for cash and the rest are on credit. These later customers are expected to pay their account in the second month following the month of sales.

vi) The units will cost $6 each from May to August inclusive and $7 each thereafter. Creditors will be paid in the month following purchases (value the inventories on FIFO basis).

vii) Other expenses = $150 per month payable in the month following the month they were incurred.

viii) Part of the premises will be sublet as an office at a rent of $600 per annum. This is paid in equal installment in July, October, January and April.

ix) Dogos cash drawing will amount to $250 per month.

x) Depreciation is to be provided on shop fixtures at 10% per annum and 20% per annum on motor vehicles.

Required:

a) Prepare a cash budget for the six (6) months ended 31/10/2019 showing the balances of cash at the end of each month. [15 marks]

b) Your newly appointed Managing Director is preparing to deliver a paper on the need to keep budgets clean and use it as a model of change in the organisation. As the Management Accountant of your organisation, briefly explain to him FIVE ways of making budgeting very effective. [10 MARKS]