QUESTION ONE: CASH BUDGET (25 MARKS) The following budgeted statement of profit or loss has been prepared for Quest Ltd for the four months January to March Year 5: January February March RRR Sales Cost of production (Increase)/decrease in inventory Cost of sales Gross profit Administration and selling overhead Net profit before interest 60 000 50 000 (5 000) 45 000 15 000 (8 000) 7 000 50 000 55 000 (17 500) 37 500 12 500 (7 500) 5 000 70 000 32 500 20 000 52 500 17 500 (8 500) 9 000 Additional information Forty percent of the production cost relates to direct materials. Materials are bought in the month prior to the month in which they are used. Purchases are paid for one month after purchase. Thirty percent of the production cost relates to direct labour, which is paid for in the month it is uncured. The remainder of the production cost is production overhead. R5 000 per month is a fixed cost which includes R3 000 depreciation. Fixed production overhead costs are paid for when incurred. The remaining overhead is variable. Forty percent of the variable production overhead is paid for in the month of usage and the balance one month later. Unpaid variable production overhead at the beginning of January is R9 000. The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 October. The amount payable is R15 000 per quarter. All sales are on credit. Twenty percent 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 January were R44 000. The bank balance on 1 January Year 5 is expected to be R5 000 overdrawn. REQUIRED: Complete the cash budget for each of the months: January and February Year 5 for Quest Ltd.