Grater Ltd. has the just started a business with capital of 1,000. The following budgeted information is available: January February March Sales 16,000 20,000 25,000 Purchases 5,000 7,000 12,000 1 Sales will be 30% cash less a 10% discount for prompt payment; all remaining sales are on one month's credit, and it is expected that 5% will go bad. All purchases are cash in the month of purchase. Rent of 2,000 per month is payable quarterly in advance. Wages of 1,000 per month are paid in the month incurred. A loan of 2,000 will be taken out on 1st January. Depreciation is 500 per month. ***Page 2 of 5 A car will be purchased for 7,000 on 1st February. 2a) Explain how budgets support the strategic planning process. (5 marks) 2b) Create a cash budget showing the three months January, February and March. (10 marks) 2c) Discuss the risks and rewards of holding Inventories. (6 marks) 2d) Explain two ways in which inventories can be controlled. (4 marks) L