Preparing a Cash Budget
La Famiglia Pizzeria provided the following information for the month of October:
Sales are budgeted to be $167,000. About 85% of sales is cash; the remainder is 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 $100,000. 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 | $ |
1. Cash receipts expected in October: $167108
| October | |
| Cash sales (85% x $167000) | 141950 |
| Credit sales collected for: | |
| September (15% x $181500 x 28%) | 7623 |
| October (15% x $167000 x 70%) | 17535 |
| Total cash receipts $ | 167108 |
2. Cash needed in October to pay for food purchases: $122500
| October | |
| Payment for food purchases made in: | |
| September (75% x $130000) | 97500 |
| October (25% x $100000) | 25000 |
| Total payment for food purchases $ | 122500 |
3.
| La Famiglia Pizzeria | |
| Cash Budget | |
| For the month of October | |
| Beginning balance | 2147 |
| Cash receipts | 167108 |
| Cash available | 169255 |
| Less: | |
| Payments for food and supplies purchases | 122500 |
| Owners' draw | 6000 |
| Workers' wages | 7300 |
| Utilities | 5950 |
| Rent | 4100 |
| Insurance | 1600 |
| Total disbursements | 147450 |
| Ending balance $ | 21805 |
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