PREPARING A CASH BUDGET TNT Pizzeria provided the following information for the month of October: a. Sales are budgeted to be $120,000. About 15 percent of sales are cash; the remainder are on account. b. TNT expects that, on average, 70 percent of credit sales will be paid in the month of sale, and 26 percent will be paid in the following month, c. Food purchases, all on account, are expected to be $83,000. TNT pays 25 percent in the month of purchase and 75 percent 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. (The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $4,400 per month. They are paid for their work weekly, so on average 90 percent of their wages are paid in the month incurred and the remaining 10 percent in the next month. e. Utilities average $5,200 per month. Rent on the building is $3,600 per month. f. Insurance is paid quarterly; the next payment of $900 is due in October. g. September sales were $130,000 and purchases of food in September equaled $98,000. h. The cash balance on October 1 is $7,680.
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 CASH BUDGET
TNT Pizzeria provided the following information for the month of October:
a. Sales are budgeted to be $120,000. About 15 percent of sales are cash; the remainder are on account.
b. TNT expects that, on average, 70 percent of credit sales will be paid in the month of sale, and 26 percent will be paid in the following month,
c. Food purchases, all on account, are expected to be $83,000. TNT pays 25 percent in the month of purchase and 75 percent 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. (The $6,000 is a payment in total to the two owners, not per person.) Various part-time workers cost $4,400 per month. They are paid for their work weekly, so on average 90 percent of their wages are paid in the month incurred and the remaining 10 percent in the next month.
e. Utilities average $5,200 per month. Rent on the building is $3,600 per month.
f. Insurance is paid quarterly; the next payment of $900 is due in October.
g. September sales were $130,000 and purchases of food in September equaled $98,000.
h. The cash balance on October 1 is $7,680.
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