Sew Perfect specialises in clothing alterations and repairs. With a slogan of 'You ask, we sew', they pride themselves in the fact that they deliver quick, quality work, and that no request is too big or too small for them. They have built up quite a strong reputation in the community where they are located, and are looking to expand their reach to customers outside of the traditional borders of their business. As part of their expansion plan, they are looking to replace some of their outdated sewing machines with state-of-the-art, heavy-duty, industrial Swiss sewing machines. The new machinery costs R75 000 and a Swiss representative must install the machines at Sew Perfect's factory shop at a cost of R3 200. Sew Perfect can sell their old machines for a total of R20 000, but must deliver them to the buyer at a cost of R380. Sew Perfect originally bought the machines 6 years ago for a total of R38 000, and depreciated it on a straight-line basis over a period of 10 years. The firm is subject to a 28% tax rate. The capital expenditure results in an increase in net working capital of R18 000.

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A: The Ramifications Of Having Working Capital Will Be Explained:

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A:

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.