Reference no: EM132873304
Problem - 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 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 - Calculate the cash needed in October to pay for food purchases.
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