Sunshine Ltd sells all of its products on account. The company has the following accounts receivable payment experience:

Percent paid in the month of sales 45%

Percent paid in the month after the sales 52%

Sunshines expected sales for the next four months are as follows:

September $200,000

October $180,000

November $230,000

December $250,000

Sunshine purchases direct material on account in the following amounts:

September $45,000

October $58,000

November $61,000

December $55,000

Sunshine pays 25% of the accounts payable in the month of purchase and the remaining 75% in the following month.

Required:

1. Prepare a schedule of cash receipts for October, November and December.
2. Prepare a schedule of cash payments for purchases for October, November and December.
3. Explain why a manager has incentive to build slack into the budget.