QUESTION 3 Baba Ltd has the following budgeted statement of profit or loss for the four months May to August 2019 Sales Cost of production (Increase)/decrease in stock Cost of sales Gross profit Admin & selling ov/hd Net profit before interest May GHS 60,000 50,000 (5,000) 45,000 15,000 (8,000) 7.000 June GHS 50,000 55,000 (17,500) 37.500 12,500 (7,500) 5.000 July GHS 70,000 32,500 20,000 52.500 17,500 (8,500) August GHS 60,000 50,000 (5,000) 45,000 15,000 (8,000) 7.000 9000 Additional Information: 1. 40% of the production cost relates to direct materials. Materials are bought in the month prior to the month in which they are used. 2. Purchases are paid for one month after purchase. 3. 30% of the production cost relates to direct labour which is paid for when it is used. The remainder of the production cost is production overhead. 4. GHS 5,000 per month is a fixed cost which includes GHS3,000 depreciation. Fixed production overhead costs are paid for when incurred. 5. The remaining overhead is variable. The variable production overhead is paid 40% in the month of usage and the balance, one month later. Unpaid variable production overhead at the beginning of May is GHS 9,000. 6. The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 October. The amount payable is GHS 15,000 per quarter. 7. All sales are on credit. 20% of receivables are expected to be paid in the month of sale and 80% in the following month. Unpaid trade receivables at the beginning of May were GHS 44,000. 8. The company intends to purchase capital equipment costing GHS 30,000 in June which will be payable in August. 9. The bank balance on 1 May 2020 is expected to be GHS 5,000. Required: Prepare a cash Budget for May to August 2019 (20 marks)