In: Accounting
La Famiglia Pizzeria provided the following information for the
month of October:
a. Sales are budgeted to be $157,000. 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
$116,000. 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 month.
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 $1,200 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:
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.