Question

Preparing a Cash Budget

La Famiglia Pizzeria provided the following information for the month of October:

1. Sales are budgeted to be $152,000. About 85% of sales is cash; the remainder is on account.
2. 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.
3. Food and supplies purchases, all on account, are expected to be $117,000. La Famiglia pays 25% in the month of purchase and 75% in the month following purchase.
4. 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.
5. Utilities average $5,950 per month. Rent on the building is $4,100 per month.
6. Insurance is paid quarterly; the next payment of $1,200 is due in October.
7. September sales were $181,500 and purchases of food and supplies in September equaled $130,000.
8. 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	$

Answer 1

1)	Cash receipts
	Cash Sales october		(152000*85%)			129200
	Credit sales oct		(152000*15%*70%)			15960
	Credit sales sept		(181,500*15%*28%)			7623
	Total Cash receipts expected in October					152783	answer
2)	Cash need in oct to pay for food purchases
	oct purchase		(117000*25%)			29250
	Sept purchase		(130,000*75%)			97500
	Cash need in oct to pay for food purchases					126750	answer
3)	Cash Budget
	Beginning balance					2,147
	Cash receipts					152783
	Cash available					154,930
	less:
	payment for food and supplies purchase					126750
	owenr's draw					6,000
	worker's wages					7,300
	utilities					5,950
	Rent					4,100
	insurance					1,200
	Total disbursements					151300
	Ending balance					3,630