Gigi Records Ltd owns a small chain of shops selling DVDs and CDs. At the beginning of June, the business had an overdraft of 35,000, and the bank had asked for this to be eliminated by the end of November. As a result, the directors have recently decided to review their plans for the next six months.

The following plans were prepared for the business some months earlier:

May 000June 000July 000Aug 000Sept 000Oct 000Nov 000Sales revenue180230320250140120110Purchases13518014294756657Administration expenses52555653484645Selling expenses22242826211918Taxation payment---22---Finance payments5555555Shop refurbishment--14186--

Notes:

1. The inventories level on 1 June was 112,000. The business believes it is preferable to maintain a minimum inventory level of 40,000 over the period of 30 November.

2. Suppliers allow one months credit.

3. The gross profit margin is 40 percent.

4. All sales proceeds are received in the month of sale. However, 50 percent of customers pay with a credit card. The charge made by the credit card business to Gigi Records Ltd is 3 percent of the sales revenue value. These charges are in addition to the selling expenses identified above. The credit card business pays Gigi Records Ltd in the month of sale.

5. The business has a bank loan, which it is paying off in monthly installments of 5,000. The interest element represents 20 percent of each installment.

6. Administration expenses are paid when incurred. This item includes a charge of 15,000 each month in respect of depreciation.

7. Selling expenses are payable in the following month.

Required:

Prepare a cash budget for the six months ending 30 November which shows the cash balance at the end of each month also based on the plans set out in the table above. Comment on the budget and explain how it can be improved.