From the following information which relates George and Zola Co you are required to prepare a month by month cash flow forecast for the second half of 20X5 and to append such brief comments as you consider might be helpful to management.

(a) The companys only product, a vest, sells at $140 and has a variable cost of $26 made up of material $15, labour $8 and overhead $3.

(b) Fixed costs of $10,000 per month are paid on the 28^th of each month.

Quantities sold/to be sold on credit

May June July Aug Sept Oct Nov Dec

3,000 1,400 1,800 1,600 1,800 2,000 1,200 2,200

(d) Production Quantities

May June July Aug Sept Oct Nov Dec

2,200 1,400 1,600 2,200 2,400 2,600 2,400 2,100

(e) Cash sales at a discount of 8% are expected to average 240 units a month

(f) Customers settled their accounts at the end of the month of sale.

(g) Suppliers of material are paid two months after the material is used in production

(h) Wages are paid in the same month as they are incurred

(i) 30% of the variable overhead is paid in the month of production, the remainder in the following month

(j) Corporation tax $18,000 is to be paid in four instalments May, September,

November and December.

(k) A new delivery vehicle was bought in July. It cost $8,000 and is to be paid for in August the next year. An old vehicle was sold for $1600, the buyer undertaking to pay in July.

(l) The company is expected to have debit $3,000 cash at the bank at 30 June 20X5

(m) No increases or decreases in raw materials, work in progress or finished goods are planned over the period.