H ltd is preparing its budget for the second quarter. The following information is available

June July August September

K000 K000 K000 K000

Sales 12,500 13,600 17,000 16,800

Direct material purchases 3,450 3,780 2,890 3,150

Direct wages are K1, 300,000 per month.

Additional information

• H ltd sells 10% of its goods for cash. The remainder of customers receive one months credit.
• Payments to creditors are made in the month following purchase.
• Wages are paid as they are incurred
• H ltd takes one months credit on all overheads
• Production overheads are K3, 200,000 per month.
• Selling, distribution and administration overheads amount to K1, 890,000 per month.
• Included in the amounts for overhead given above are depreciation charges of K300,000 and K190,000 respectively.
• The cash balance at the end of June is forecast to be K1, 235,000.
• An asset costing K5, 600,000 will be acquired in September.
• H ltd expects to purchase a delivery vehicle in July for K9,870,000
• Capital expenditure is paid one month after being incurred.

Required

• Prepare a cash budget for each of the months July to September.
• Examine and interpret the cash budget