Question 2 The following data and estimates are available for Raggletaggle Ltd. for June, July and August. June July August () () () Sales 210,000 245,000 264,000 Wages 48,000 53,000 61,000 Overheads 37,000 49,000 62,000 The following information is also available: June July August Sept () () () () Opening Inventory 28,000 30,000 40,000 22,000 Cost of goods sold 38,000 48,000 69,000 Notes: 1. 20% of sales are for cash, the balance is received the following month. The amount received in June for May sales is 155,000. 2. Wages are paid in the month they are incurred. 3. Overheads include 6,000 per month for depreciation. Overheads are settled the month following. 28,000 is to be paid in June for May overheads. 4. Purchases are paid for in the month of purchase. 5. New equipment costing 88,000 is to be paid for in July. 6. A Tax bill of 60,800 is paid in August. 7. The opening cash balance in June is an overdraft of 20,000. Required: (a) Calculate the amount of purchases in each of the months of June, July and August. (9 marks) (b) Prepare cash budgets for June, July and August. (15 marks) (c) Describe briefly the objective and advantages of preparing cash budgets. (6 marks) Total 30 Marks