Preparing a Cash BudgetLa Famiglia Pizzeria provided the following information for the monthof October:2. Sales are budgeted to be $157,000. About 85% of sales is cash; theremainder is on account.b. La Famiglia expects that, on average, 70% of credit sales will bepaid in the month of sale, and 28% will be paid in the followingmonthe. 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 $6,000is a payment in total to the two owners, not per person.) Variouspart-time workers cost $7,500 per month. They are paid for theirwork weekdy so on average 90% of their wages is paid in the monthincurred and the remaining 10% in the next month.e. Utilities average $5,950 per month. Rent on the building is $4,100per month f. Insurance is paid quarterly; the next payment of $1,200 is due inOctober.g. September sales were $181,500 and purchases of food andsupplies in September equaled $130,000.h. The cash balance on October 1 is $2,147.Required:1. Calculate the cash receipts expected in October. (Hint:Remember to include both cash sales and payments from creditsales.)2. Calculate the cash needed in October to pay for food purchases.3. Prepare a cash budget for the month of October
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Preparing a
La Famiglia Pizzeria provided the following information for the month
of October:
2. 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
e. 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 $7,500 per month. They are paid for their
work weekdy so on average 90% of their wages is 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. (Hint:
Remember to include both cash sales and payments from credit
sales.)
2. Calculate the cash needed in October to pay for food purchases.
3. Prepare a cash budget for the month of October
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
