4. The following data and estimates are available for a FarmFresh food processing section in a distribution centre for April, May and June.

Additional Notes:

1. The closing cash balance at 31st March is expected to be £1,800.

2. 25% of sales are for cash, the balance being received the following month. The amount to be received in April for March’s credit sales is expected to be £15,000.

3. Purchases of direct materials are paid for in the month after purchase. In April £9,500 will be paid for purchases relating to the previous month.

4. Overheads include £500 per month for depreciation. Overheads are paid in the following month. In March, overheads are anticipated to be £5,900 including depreciation.

5. Wages are paid in the month they are incurred.

6. A new machine for the centre is planned to be purchased in June at a cost of £10,000, this will be paid in the month of purchase.

Required:

(a) Calculate the amount to be received from sales (note 2) in each of the months of April, May and June.

(b) Calculate the amount to be paid for direct materials purchases (note 3) in each of the months of May and June, April is given above.

(c) Prepare cash budgets for the months of April, May and June.

(d) What advice would you offer the company given the forecast closing cash balances.