Daisy Hansen, newly hired Director of Elder Care Inc., wants to institute a form
ID: 2599773 • Letter: D
Question
Daisy Hansen, newly hired Director of Elder Care Inc., wants to institute a formal budgeting system for the organization. She is focusing on the two main departments, Occupational Therapy and Nutrition. She has collected the following data about the two departments. The data describe three possible scenarios with client volumes of 20, 30, or 40 clients using the facility per day. To simplify the process Daisy has decided to assume that each month comprises of four weeks and that the facility will be open from Mon through Friday (i.e five days each week.). In addition to the direct expenses of the two departments, Elder Care pays $2000 per month for rent for the facility and Daisy Hansen draws a salary of $3000 per month for administrative services. These two expenses are allocated equally (50% each) to the two departments.
Occupation Therapy Department
Expenses per month
20 clients
30 clients
40 clients
Number of Therapists
Note: A therapist can work at most with 10 clients per day and is compensated at the rate of $1,500 per month.
2
3
4
Equipment depreciation
$200
$200
$200
Craft Materials
$600
$900
$1200
Utilities
$300
$400
$500
Nutrition Department
Expenses per month
20 clients
30 clients
40 clients
Food Cost
$4000
$6000
$8000
Kitchen staff salaries
$4,000
$4,000
$4,000
Equipment depreciation
$500
$500
$500
Utilities
$1400
$2000
$2600
Flowers and seasonal decorations
$200
$260
$320
Required:
a. Prepare expense budgets for the Occupation Therapy and Nutrition Departments for the following client volumes:
January 20 clients/day
February 30 clients/day
March 40 clients/day
b. After consultation with the staff it was determined that the likely client volume is going to be:
January 20 clients/day
February 31 clients/day
March 45 clients/day
Recalculate the budgets for the two departments for these revised client volumes.
c. Based on the scenario in part b., prepare in good form
i. an expense budget for each of the departments separately for the months of January, February, and March.
And
ii. The expense budget for the whole organization by combining the expense budgets for the two departments for the months of January, February, and March.
d. Assume that each client pays $60/day for a visit which includes occupational therapy charges and charges for lunches and snacks for the day. In addition, Daisy has decided that the organization should keep a minimum cash balance equal to $2000 at the end of each month. Assume that cash balance on January 1 was $2,500.
Based on your budgets in parts b. and c., prepare a cash budget for the months of January, February and March. Indicate how much, if any, the organization will need to borrow in any of the months in the budget.
Please provide detail solution to EACH questions, Thank you very much
Expenses per month
20 clients
30 clients
40 clients
Number of Therapists
Note: A therapist can work at most with 10 clients per day and is compensated at the rate of $1,500 per month.
2
3
4
Equipment depreciation
$200
$200
$200
Craft Materials
$600
$900
$1200
Utilities
$300
$400
$500
Explanation / Answer
a. Occupation Therapy Jan Feb Mar No.of Clients 20 30 40 Therapist salary 3000 4500 6000 Equipment depreciation 200 200 200 Craft Materials 600 900 1200 Utilities 300 400 500 Rent for the facility 1000 1000 1000 Daisy salary 1500 1500 1500 Total expenses 6600 8500 10400 Nutrition Dept. Jan Feb Mar No.of Clients 20 30 40 Food Cost 4000 6000 8000 Kitchen staff salaries 4000 4000 4000 Equipment depreciation 500 500 500 Utilities 1400 2000 2600 Flowers and seasonal decorations 200 260 320 Rent for the facility 1000 1000 1000 Daisy salary 1500 1500 1500 Total expenses 12600 15260 17920 b. Occupation Therapy Jan Feb Mar No.of Clients 20 31 45 Therapist salary 3000 6000 7500 Equipment depreciation 200 200 200 Craft Materials 600 900 1200 Utilities 300 400 500 Rent for the facility 1000 1000 1000 Daisy salary 1500 1500 1500 Total expenses 6600 10000 11900 Nutrition Dept. No.of Clients 20 31 45 Food Cost 4000 6200 9000 Kitchen staff salaries 4000 4000 4000 Equipment depreciation 500 500 500 Utilities 1400 2000 2600 Flowers and seasonal decorations 200 260 320 Rent for the facility 1000 1000 1000 Daisy salary 1500 1500 1500 Total expenses 12600 15460 18920 c. i.. Same as above ii… Occupation Therapy Nutrition Dept. TOTAL Jan Feb Mar Jan Feb Mar Jan Feb Mar No.of Clients 20 31 45 20 31 45 40 62 90 Therapist salary 3000 6000 7500 3000 6000 7500 Daisy salary 1500 1500 1500 1500 1500 1500 3000 3000 3000 Kitchen staff salaries 4000 4000 4000 4000 4000 4000 Food Cost 4000 6200 9000 4000 6200 9000 Equipment depreciation 200 200 200 500 500 500 700 700 700 Craft Materials 600 900 1200 600 900 1200 Utilities 300 400 500 1400 2000 2600 1700 2400 3100 Rent for the facility 1000 1000 1000 1000 1000 1000 2000 2000 2000 Flowers and seasonal decorations 200 260 320 200 260 320 Total expenses 6600 10000 11900 12600 15460 18920 19200 25460 30820 d. Cash Budget TOTAL Jan Feb Mar No.of Clients 20 31 45 Opening balance 2500 21200 48520 Client revenues for the mth. 37200 52080 83700 Total cash available 39700 73280 132220 Less Cash Expenses: Therapist salary 3000 6000 7500 Daisy salary 3000 3000 3000 Kitchen staff salaries 4000 4000 4000 Food Cost 4000 6200 9000 Craft Materials 600 900 1200 Utilities 1700 2400 3100 Rent for the facility 2000 2000 2000 Flowers and seasonal decorations 200 260 320 Total cash expenses 18500 24760 30120 Surplus/Deficit 21200 48520 102100
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