Prepare a cash budget for the months of July, August, and September.

Section A: Compulsory Question 1 Noel & Sons Limited is in the process of preparing its cash budget for the months of May, June, July, August and September. Actual sales for March and April and forecasted sales for the next five months are as follows: March 1,000,000 April May June July September August 900,000 1,000,000 1,400,000 1,800,000 2,300,000 2,500,000 (a) 20 % of sales are for cash; 50 % of total sales are on credit and are collected in the month following sale. The remaining 30 % of sales are on credit and are collected in the second month after sale. There are no bad debts. (b) Purchases of raw materials are made in the month prior to the expected sale and amount to 50 % of expected sales. They are paid for in the month following their purchase. (c) Wages, rent and selling expenses are 200,000 in May and will increase by 50,000 per month onwards. (d) Interest of 25,000 is payable every month. Taxes of 80,000 are payable in May, and 150,000 is due in August. Cash dividends of 100,000 are payable in June. (g) Capital expenditure is forecast as follows: May 150,000; July 100,000; August 100,000 and September 500,000. Cash on hand on ISt May is 10,000 and a 5,000 minimum cash balance is required (h) each month. Required: (a) (b) Prepare a cash budget for May, June, July, August and September. (30 Marks) Comment on any three possible benefits from preparing a cash budget (10 marks) Total 40 marks Page 2 of 5