Part B: Cash Budgets 1 Millbrook Manufacturing Limited has just been established on 30th September 2020. The company has prepared its first budgeted income statement for the next three months as follows: 1 1 October 2020 November 2020 December 2020 Sales $200,000 $400,000 $500,000 Salary and wages $50,000 $110,000 $130,000 expense Rent expense $6,000 $6,000 $6,000 Utilities expenser $1,000 $1,800 $2,200 Insurance expense $2,000 $2,000 $2,000 1 Other information: 1. Sales are made up of 50% cash sales and the remainder on credit. The terms of receipts for the credit sales are 80% to be collected in the next month and the remainder 20% in the following month. 1 2. 90% of the salary and wages are paid in the same month and the remainder 10% in the next month. 1 3. The quarterly rent was paid on 1st October 2020. 4. The annual insurance was paid on 1st October 2020.1 5. All utilities are paid in the same month that they are incurred. 1 6. Plan to purchase of a motor vehicle in November 2020 for $10,000. The salvage value is $2,000 at the end of 4 years. 1 7. The cash balance as at 1st October 2020 is $15,000 (in overdraft). 1 1 The CFO claims that the cash position is likely to improve in November and December 2020 even though there is a current bank overdraft balance of $15,000 as at 1st October 2020. 1 Required: Is the CFO correct in his prediction of the cash positions in November and December 2020? Prepare the cash budget for the months of October to December 2020 to prove your answer. Show all workings. 1 (10 marks)