You have been asked to prepare a cash budget for Whitborrow plc for the next three months, October, November and December. The managers are concerned that they may not have sufficient cash to pay for a £150,000 investment in equipment in December. The overdraft has reached its limit of £70,000 at the present time -the end of September. Sales during September were a total of £400,000, of which £55,000 was received in cash, £165,000 is expected to be paid in October, with the remainder likely to How in during November. Sales for the next three months are expected to be:

There is a gross profit margin of 40 per cent on sales. All costs (materials, labour and other) are paid for on receipt. Only 20 per cent of customer sales are expected to be paid for in the month of delivery. A further 70 per cent will be paid after one month and the remainder after two months. Labour and other costs amount to 10 per cent of sales. Debtor levels at the end of September are £400,000 and the investment in stock is £350,000.
Required
Prepare a cash budget for October, November and December, and state if the firm will be able to purchase the new equipment.

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Total sales Cash sales Credit sales October November December 450,000 550,000 700,000 90,000 110,000 140,000 360,000 440,000 560,000