Question 2 (Total: 25 marks)

Styles and Malik have taken up a franchise arrangement with Borenos Chicken. The business has a bank overdraft limit of RM40,000. The following are the forecast figures for the next six (6) months:

Month	Purchases RM	Sales RM	Wages & Salaries RM	Overhead RM
November	40,000	85,000	20,000	15,000
December	50,000	110,000	20,000	15,000
January	30,000	58,000	40,000	18,000
February	40,000	75,000	20,000	18,000
March	60,000	120,000	25,000	20,000
April	60,000	120,000	25,000	20,000

Additional information:

1. A franchise payment is made of RM6,000 per month.
2. 50% of the sales are for cash, 25% is received one month later and 25% two months later.
3. Purchases are paid one month later.
4. Wages are paid for in the month incurred.
5. Overheads do not include:
   1. Rent RM4,000 per month paid three monthly in advance, in December, March, June and September of the following year.
   2. Depreciation RM6,000 per month.
   3. All other overhead is paid one month later.
6. Capital expenditure payments will be:
   1. February RM8,500
   2. March RM2,250
   3. April RM5,000
7. A cash balance of RM2,250 is forecast at 1 January.

You are required:

(a) to prepare the Cash Budgets for January, February and March. (20 marks)

(b) to comment briefly on the position of the Cash Budgets at the end of March.

(5 marks)