Question 4 (25 marks) (a) Tom Company is a trading company which sells components for computers. The financial controller is preparing the budget for three months ended 30 June 2021. You are given the following information: 1. Salaries and wages Month Overheads including depreciation February March April May June Sales Units 4,800 5,000 3,800 3,500 3,200 Purchases $ 18,000 16,000 14,000 12,000 12,000 10,000 10,000 11,000 12,000 13,000 9,000 10,000 10,250 10,250 10,250 2. The selling price in February 2021 is $6 per unit and this is to be increased to $8 per unit in April 2021. 50% of sales are for cash and 50% on credit to be paid two months later. 5. 6. 3. Purchases are to be paid for two months after purchase. 4. Salaries and wages are to be paid 75% in the month incurred and 25% in the following month. Overheads are to be paid in the month after they are incurred. Cash dividends of $12,000 are to be paid in the month of June 2021. 7. Two machines totaling $30,000 are to be purchased on 1 May 2021. The cost of machines is to be paid equally in three monthly instalments commencing on 31 May 2021. 8. It is estimated that the amount of machinery and bank balance as at 1 April 2021 would be $240,000 and $5,000 respectively. 9. Machinery are depreciated on a monthly basis at 10% per annum using the straight-line method. Required: (1) Prepare a month by month cash budget of Tom Company for the three months ended 30 June 2021. (17 marks) (ii) Indicate whether or not it will be necessary to make arrangements for extra finance and, if so, your recommendation as to what form the company should take