1. Occipital Wraps Company makes both cash and credit sales. Budgeted sales for the last quarter of the fiscal year are as follows:

	August	September	October
Cash Sales	$40,000	$60,000	$100,000
Credit Sales	300,000	340,000	440,000
Total	$340,000	$400,000	$540,000

Experience reveals that 6% of credit sales will be uncollectible. Of the sales that are collectable 50% are collected in the month of the sale; 35% are collected in the month following the sale, and the remainder are collected in the next following month. (Credit sales were $200,000 in July).

Inventory purchases each month are 100% of the cost of the following months projected sales. Occipitals gross profit rate is 50%, that is a 100% markup on cost. All merchandise purchases are made on credit and paid for in the month following the purchase. Administrative costs are expected to be $150,000 per month.

The cash balance on September 1 is expected to be $20m,000. The minimum cash balance is $10,000.

Required:

-Prepare the cash budget for September and October.

-Why are budgets important for business organizations?