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 clients volumes are 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 an expense budget for the whole organization 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.