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QUESTION 3 You have been asked to prepare a forecast cash flow for a Company for the six months from January 2018 to June 2018. You can assume that the Company expects to commence trading on January 1 2018. The company, with your help, has drawn up the following estimates for the first six months. Production is relatively straightforward and they will hire labour on the basis of what they need. You have the following information: (1) The company has acquired premises and they will occupy them from January 12018 , rent being paid quarterly in advance and on the first day of the quarter. The rent is 635,000 per quarter; (2) Production equipment will cost 400,000 and will be payable two months after delivery. Delivery is the fint week in January. (3) Estimates of sales and stock levels are as follows: (4) Raw material costs are 130 per unit. No stock of raw material will be held. Purchases are paid the month following delivery. (5) All workers will be paid 44 per item produced and wages are paid in the month of production. (6) Cash expenses are expected to be 16,000 per month payable during the month. (7) Selling price is expected to be 250 per unit. All sales are on credit, and should be paid two months after delivery. (8) The Company expects to receive a government grant of 250,000 in January. Additionally, a number of investors will contribute a total of 400,000. They expect 50% of this 400,000 in February and the balance in June. (9) Depreciation is 20% on an annual basis straight line. (10) Ignore interest costs if the Company has a cash surplus or has borrowings. Required: Prepare the following budgets for the six months to 30A June 2018: (a) A production budget for each of the six months; (5 marks) (b) A labour cost budget for each of the six months; (5 marks) (c) A cash flow forecast for each of the six months; (15 marks) Total (25 marks)