Preparing a Cash Budget La Famiglia Pizzeria provided the following information

Question

Preparing a Cash Budget La Famiglia Pizzeria provided the following information for the month of October: a. Sales are budgeted to be $152,000. About 85% of sales is cash; the remainder is on account. b. La Famiglia expects that, on average, 70% of credit sales will be paid in the month of sale, and 28% will be paid in the following month C. Food and supplies purchases, all on account, are expected to be $107,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase. d. Most of the work is done by the owners, who typically withdraw $6,000 a month from the business as their salary. (Note: The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $7,300 per month. They are paid for their work weekly, so on average 90% of their wages are paid in the month incurred and the remaining 10% in the next mont e. Utilities average $5,950 per month. Rent on the building is $4,100 per month. f. Insurance is paid quarterly; the next payment of $1,000 is due in October. g. September sales were $181,500 and purchases of food and supplies in September equaled $130,000. h. The cash balance on October 1 is $2,147. Required: If required, round your answers to the nearest dollar. 1. Calculate the cash receipts expected in October. 129,200 X 2. Calculate the cash needed in October to pay for food purchases. 107,000X

Explanation / Answer

1) Cash receipts expected in october; $ Cash sales (152000*85%) 129200 Collections from accounts receivable; Regarding sale of September (181500*85%*28%) 43197 Regarding sale of October (152000*15%*70%) 15960 Total collections 188357 2) Cash needed to pay food purchases $ Regarding purchase of September (130000*75%) 97500 Regarding purchase of October (107000*25%) 26750 Total payments 124250 3) La Famiglia Pizzeria Cash Budget For the month of October $ Begning balance 2147 Cash Receipts 188357 Total cash available 190504 Less: Cash Payments: Payments for food and supplies purchase 124250 Owners draw 6000 Workers' wages 7300 Utilities 5950 Rent 4100 Insurance 1000 Total cash Payments 148600 Ending balance 41904

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