QUESTION FOUR [25] The following information pertains to SMR Ltd for the three months ended 31 December. Actual Budgeted October November December R R R Revenue (20% for cash and 80% on credit) 360 000 380 000 400 000 Purchases (10% for cash 90% on credit) 240 000 280 000 320 000 Salaries and wages paid 40 000 60 000 60 000 Cash expenses 24 000 28 000 32 000 Depreciation 2 000 2 000 2 000 Additional information: 1. It is expected that debtors will settle their accounts as follows: 20% in the month of invoice 70% in the month after the month of invoice, and 5% in the second month after the month of invoice. The remaining 5% is usually written off as bad debts. 3 2. Trade creditors are paid in the month after the purchases at a discount of 5%. 3. 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred. 4. Expenses are paid as they arise. 5. The favourable bank balance on 1 November was R 16 000. Required: 4.1 Prepare the cash budget for November and December. (20) 4.2 Discuss how the budgeting process in an organisation benefits a functioning standard costing system.