From the following information which relates to George and Zola, prepare a month-by-month cash budget for the second half of 20X5 and make brief comments as you consider might be helpful to management.

• The company's only product, a leather bag, sells at K40 and has a variable cost of K26 made up as

Material K20

Labour K4

Variable overhead K2

• Fixed costs of K6000 per month are paid on the 28th of each month.
• Quantities sold/'to be sold on credit

May    June     July      August September   October          November       December

1000   1200    1400    1600    1800                2000                2200                2600

• Production quantities

May  June   July    August         September    October       November    December

1200 1400  1600  2000            2400            2600            2400            2200

• Cash sales at a discount of 5% are expected to average 100 units a month.
• Customers are expected to settle their accounts by the end of the second month following the sale.
• Suppliers of material are paid two months after the material is used in production.
• Wages are paid in the same month as they are incurred. (i) 70% of the variable overhead is paid in the month of production, the remainder in the following
• Company tax of K18,000 is to be paid in October.
• A new delivery vehicle was bought in June, the cost of which, K8,000 is to be paid in August. The old vehicle was sold for K600, the buyer undertaking to pay in July.
•  The company is expected to be K3,000 overdrawn at the bank at 30 June 20X5.
• The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same.

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