Milo Company buys and sells beach umbrellas. The selling price of each beach umbrella is R150 and it costs the company R70. The company is preparing budgets for the last quarter of the year and has assembled information to assist in the budget preparation. The marketing department has estimated sales as follows for the remainder of the year (in units):

Month Expected demand September 4 000 October 3 000 November 7 000 December 5 000

The company sold 3 900 beach umbrellas during August and wrote off bad debts of R26 500. All sales are on account. The company normally collects 30% of a months sales before the same month ends, collects 40% in the month following the month of the sale and collects 25% two months after the sale. The remaining 5% is written off three months after the sale because it is generally not recoverable. Milo Company expects to sell 2 000 beach umbrellas during January 2020. The company estimates that its bank balance will be sitting at R80 000 at 30 September 2019. Each beach umbrella is hard to acquire. Therefore, the company requires that the ending inventory of beach umbrellas to be equal to 20% of the following months estimated sales needs. Sixty percent of a months purchases of beach umbrellas is paid for in the month of purchase; the remainder is paid for in the following month. Milo Company decided to trade in its old and fully depreciated machine for R15 000 for a new machine that will cost the company R250 000 on 1 October 2019. The machine will be used for five years. Other expenses, including bad debts and depreciation, that are estimated to cost R120 000 per month.

REQUIRED:

a)Prepare the cash budget of Milo Company for each of the following three months: October, November and December 2019.

b)Analyse the projected cash budget of Milo Company for the last quarter of the 31 December 2019 financial year.