Preparing a Cash Budget La Famiglia Pizzeria provided the following information
ID: 2603670 • Letter: P
Question
Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for the month of October:
Sales are budgeted to be $166,000. About 85% of sales are cash; the remainder are on account.
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.
Food and supplies purchases, all on account, are expected to be $113,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
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 month.
Utilities average $5,950 per month. Rent on the building is $4,100 per month.
Insurance is paid quarterly; the next payment of $1,600 is due in October.
September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
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.
$
2. Calculate the cash needed in October to pay for food purchases.
$
3. Prepare a cash budget for the month of October.
La Famiglia Pizzeria Cash budget For the month of October Beginning balance $ Cash receipts Cash available $ Less: Payments for food and supplies purchases $ Owners' draw Workers' wages Utilities Rent Insurance Total disbursements $ Ending balance $Explanation / Answer
Answer:$166,153
$
2. Calculate the cash needed in October to pay for food purchases.
Answer:$125, 750
3. Prepare a cash budget for the month of October
La Famiglia Pizzeria
Cash budget
For the month of October
October
Beginning balance
$ 2,147
Cash receipts
$ 166,153
Cash available
$ 168,300
Less:
Payments for food and supplies purchases
$ 125,750
Owners' draw
$ 6,000
Workers' wages
$ 7,300
Utilities
$ 5,950
Rent
$ 4,100
Insurance
$ 1,600
Total disbursements
$ 150,700
Ending balance
$ 17,600
Working Notes:
Particulars
Sep
Oct
Sales
$ 181,500
$ 166,000
Cash Sales 85% of Sales
$ 154,275
$ 141,100
Credit Sales (Sales- Cash sales)
$ 27,225
$ 24,900
Credit sale collections @ 70% of Credit sales
$ 19,057.50
$ 17,430.00
Collection of Previous month @ 28%
$ 7,623
A
Cash receipts
$ 173,333
$ 166,153
Purchases
$ 130,000
$ 113,000
Payment to Purchases @ 25%
$ 32,500
$ 28,250
Previous month payment @ 75%
$ 97,500
B
Total payments for food and supplies purchases
$ 32,500
$ 125,750
Workers wages @ 90% of $7,300
$ 6,570
$ 6,570
Previous month wages @ 10% pf $7,300
$ 730
C
Total Wages paid
$ 6,570
$ 7,300
La Famiglia Pizzeria
Cash budget
For the month of October
October
Beginning balance
$ 2,147
Cash receipts
$ 166,153
Cash available
$ 168,300
Less:
Payments for food and supplies purchases
$ 125,750
Owners' draw
$ 6,000
Workers' wages
$ 7,300
Utilities
$ 5,950
Rent
$ 4,100
Insurance
$ 1,600
Total disbursements
$ 150,700
Ending balance
$ 17,600