Required: a. Prepare Rizzo's budgeted Income statement for May. b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000. c. Why Rizzo's budgeted cash flow in May differs from its budgeted net income? Answer is not complete,
Required: a. Prepare Rizzo's budgeted Income statement for May. b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000. c. Why Rizzo's budgeted cash flow in May differs from its budgeted net income? Answer is not complete,
Required: a. Prepare Rizzo's budgeted Income statement for May. b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000. c. Why Rizzo's budgeted cash flow in May differs from its budgeted net income? Answer is not complete,
Transcribed Image Text: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:
January
February
March
April
Purchases
$ 40,000
32,000
44,000
24,000
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.
Sales
$ 62,000
49,000
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:
65,000
42,000
Percent collected in month of sale
Percent collected in month following sale
Percent collected in the second month following sale
Required A
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.
Required:
a. Prepare Rizzo's budgeted Income statement for May.
b. Prepare Rizzo's cash budget for May. Assume that the company's cash balance on May 1 Is $25,000.
c. Why Rizzo's budgeted cash flow In May differs from its budgeted net Income?
Complete this question by entering your answers in the tabs below.
Required B Required C
Budgeted sales
Cost of goods sold
Gross profit
Variable selling and administrative costs
Fixed selling and administrative costs
Prepare Rizzo's budgeted income statement for May.
RIZZO'S
Budgeted Income Statement
For the Month of May
Budgeted pretax operating income
Interest expense
Interest expense
Pretax income
income taxes
***** 333 33
✔
X
X
$
Answer is not complete.
S
S
72,000
43,200
28,800
3,600
12,000
13,200 X
0
4,500
8,700
S (13,200)
30%
60
10
$ (13,200)
33
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