Question

Preparing a Cash Budget

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

1. Sales are budgeted to be $162,000. 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 $103,000. 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 $1,100 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.)		Amount in $
	Cash sales of October	137,700	(162,000 x 85% )
	Credit Sales collection of October	17,010	( 162,000 x 15% x 70% )
	Credit Sales collection of September	7,623	(181,500 x 15% x 28% )
	Cash receipts expected in October	162,333
2.)		Amount in $
	Cash payment for food & supplies of october	25,750	(103,000 x 25% )
	Cash payment for food & supplies of September	97,500	(130,000 x 75% )
	Cash needed in October to pay for food purchases	123,250
3.)	La Famiglia Pizzeria
	Cash budget
	For the month of October	Amount in $
	Beginning balance	2,147
	Cash receipts	162,333
	Cash available	164,480
	Less:
	Payments for food and supplies purchases	123,250
	Owners' draw	6,000
	Workers' wages ( 7,300 x 90% ) + ( 7,300 x 10% )	7,300
	Utilities	5,950
	Rent	4,100
	Insurance	1,100
	Total disbursements	147,700
	Ending balance	16,780