Greatfone Style Limited commenced trading twelve months ago and as a result of a very successful year is seeking bank finance to expand. The company imports a specialised mobile phone case from an overseas supplier and currently sells it in a limited range of stores in Ireland and the UK. The case is unique in that it comprises a high quality, durable resin and can be adjusted to fit either of the two leading smartphones in the market. Additional bankfunding would allow the company to extend its retailer network in the UK with the possibility of establishing outlets in other parts of Europe. However, to consider an application for finance, the bank requires Greatfone Style Limitedto prepare a cash budget, forecasting its receipts and payments for the next six months commencing on 1 May 2015. The company has provided the following information: 1. Each case will cost 6.20 to purchase from the overseas supplier and the company has agreed to pay 50% of all purchases in cash with the remainder paid in the month after purchase. 2. 3. Greatfone Style Limited will sell the case to retail customers for 11.25 and projects the following sales (inunits) for the next six months: May June 10,000 12,000 July 15,000 August 15,000 September October November 16,000 18,000 18,000 To encourage prompt payments from customers, effective from 1 May 2015, the company has decided to give a discount for cash payment. Greatfone Style Limited expects that 20% of all customers will avail of this offer and will receive a discount of 5%. Of the remaining monies receivable, the company expects to receive 50% one month after the month of sale, 45% two months after the month of sale and the remainder will bebad debts. a) To ensure that sales opportunities are not missed, the company will hold inventory at the end of each month amounting to 10% of the following month's projected sales. At 1 May 2015, the company expects to have 1,000 cases in inventory. b) Salary and wage costs per month are expected to be 19,000 for the first two months and to increase by 2,000 per month for each of the next four months, as the company hires new staff. c) Administration costs are projected to be 82,200 for the year, including depreciation of 9,900. d) The company has decided to purchase additional computer equipment to support its sales staff. Laptops and printers costing 16,200 will be purchased and paid for in October. e) On 1 May 2015, Greatfone Style Limited projects that it will have the following balances: Bank overdraft 2,960 Accounts receivable (all amounts to be received in May 2015) 30,980 Accounts payable (due in May 2015) 25,100