Problem 4

County Clinic is preparing its October, November, and December 20x1 operating budget. In preparing their budget, their accounting department performed a detailed cost analysis of earlier periods cost incurred and prepared the following supporting information:

1. The number of patients expected to visit the clinic for September, October, November, and December are 1,800, 2,000, and 2,200, and 2,500, respectively.
2. The average bill for patient services is $80 with 50% paid in cash when the services are provided, 40% paid the month following when the services are provided, and 10% never paid, i.e., uncollectible.
3. Estimated monthly operating costs and expenses are:
   1. Purchases of operating supplies (see 5 below)
   2. Clinic operating expenses, including depreciation of $1,000 per month, for October, November and December are $18,000, $20,500, and $20,000, respectively.
   3. Staff wages and salaries for October, November and December are estimated as $41,000, $45,000, and $49,000, respectively.
   4. Other operating costs and expenses are estimated at $5,000 per month.
4. Assume that monthly operating costs and expenses are paid in the month incurred.
5. For budgeting purposes, estimated supply costs are $20 per patient visit. In addition, County Clinic maintains an end-of-the-month supplies inventory of 10% of the next months estimated supply cost. (Assume that December end-of-the-month supplies inventory will be $4,500).

At the end of September, County Clinic had a cash balance of $20,000 and supplies inventory of $3,750.

Required

For October, November, and December, prepare the following schedules:

1. Supplies purchases budget.
2. Expense budget.
3. Cash disbursements budget
4. Cash collections/receipts budget.
5. Cash budget, i.e., combined cash receipts and cash disbursements.
6. The clinic desires to maintain a month-ending cash balance of at least $20,000. Advise management of any month in which their budgeted cash balance will not be at least the minimum.

Note: All budget schedules must have a column for each month and a total column (and, of course, the required line items, as appropriate), as follows:

October

November

December

Total