Business, 09.07.2020 01:01 marelinatalia2000

Rizzo's has been in business since January of the current year. The company buys frozen pizza crusts and resells them to large supermarket chains in five states. The following information pertains to Rizzo's first four months of operations: Purchases Sales
Jan. $ 40,000 $ 62,000
Feb. 32,000 49,000
Mar. 44,000 65,000
Apr. 24,000 42,000
Rizzo's expects to open several new sales territories in May. In anticipation of increased volume, management forecasts May sales at $72,000. To meet this demand, purchases in May are budgeted at $42,000. The company maintains a gross profit margin of approximately 40 percent. All of Rizzo's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year:
Percent collected in month of sale 30 %
Percent collected in month following sale 60 %
Percent collected in the second month following sale 10 %
Rizzo's normally pays for 80 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $12,000 per month. Of this amount, $4,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred.
Rizzo's debt service is $5,000 per month. Of this amount, approximately $4,500 represents interest expense, and $500 is payment on the principal. The company's tax rate is approximately 35 percent. Quarterly tax payments are made at the end of March, June, September, and December.
Instructions
a. Prepare Rizzo's budgeted income statement for May. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)
Budgeted income statement:
$
$
$
$
$
b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 is $25,000. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)
Cash budget:
Beginning cash, May 1 $
Collections on March sales
Collections on April sales
Collections on May sales
Total cash available $
Payments on April payables
Payments on May payables
Variable selling & administrative costs
Fixed selling & administrative costs
Debt service payments
Ending cash, May 31

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Rizzo's has been in business since January of the current year. The company buys frozen pizza crusts...

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