Question 1 Andrew is the owner of a store named Chubs & Hubs Pet Store, which sells dogs and cats. Andrew asked the company accountant to prepare a cash budget for the business covering the following 3 months to 31st March. Here are the details: 1. Sales of dogs and cats are made on cash as follows: Dogs Cats Total January 3,000 6,000 9,000 February 5,000 7,000 12,000 March 7,000 8,000 15,000 2. Suppliers allow two month's credit. The amount due for dogs purchased in November is 400, 500 in December, 600 in January and 700 in February. 3. An insurance premium of 700 is payable in February to cover the 6 months to July. 4. Wages of 1,500 per month are payable for January and February rising to 2,000 for March. 5. Andrew plans to take 600 from the business each month for his own use. 6. Motor expenses of 500 are payable each month. 7. The business regularly runs local radio advertisements costing 500 per month. 8. An equipment hiring expenses 100 per month. Required: a) Prepare a cash budget for Andrew's business for the three months ending 31st March. (The bank balance at 1st January is 3,500). [16 marks] b) Instead of hiring the equipment, Andrew could buy it for 15,000 and this would be far more convenient for the business. Advise Andrew on whether the business can afford to do this? [4 marks] c) Describe FIVE benefits to a small business that might arise from regularly producing a cash budget.