Using the following data, prepare a cash budget for Plains Medical Center for Fiscal 2018. You can assume that the Medical Center started the fiscal year with $7,264,871 in cash on its balance sheet.

Once you compile that budget consider the following issues:

Assume the Medical Center wishes to keep a minimum cash balance each month that equals one month of salary expense plus one month of salary and other expenses. In addition, they are required to keep one year's worth of debt service payments in cash on hand each month. So your minimum cash balance must be the sum of those salary/expense items noted here, plus one year of debt payments. What is the minimum cash balance that Plains Medical Center should keep each month based on these assumptions?

Look at your cash budget calculations. Are there any months where the cash balance in that month falls below that minimum? If so, what management actions can you take to address this issue? Be specific!

Plains Medical Center
Cash Budgeting Data
Fiscal Year 2018 (7/1/17-6/30/18)
Estimated Patient Billings (at expected collection amount)
July	$7,219,178
August	7,219,178
September	6,986,301
October	7,219,178
November	6,986,301
December	7,219,178
January	7,219,178
February	6,520,548
March	7,219,178
April	6,986,301
May	7,219,178
June	6,986,301
Total	$85,000,000
50% of billings go to government payers, 40% to commercial payers, and 10% are self-pay accounts
The historic timing of collections looks like this:
		Government		Commercial	Self-Pay
Month of service		15%		10%	2%
Month following service		50%		45%	10%
Second month following service		15%		15%	10%
Third month following service		10%		15%	10%
Fourth month following service		5%		10%	8%
Uncollectable		5%		5%	60%
Total		100%		100%	100%
You can assume that billings increased by 5% each month from year to year, so you can use March 2017/1.05 as a part of estimating collections for July 2018
Salaries for each month are estimated at $2,250,000 + 20% of that month's billings.
* Payments for Salaries are 50% of the current month estimate + 50% of the prior month's estimate
* Hourly employees are given a 5% bonus at Christmas (paid during December) totaling 10% of estimated salaries for December
Supply purchases are estimated at 17.5% of the billings in that month
* Payments for supplies are made in total in the following month
Other operating expense purchases are estimated at 12.5% of the billings in that month
* Payments for other expenses are made in total in the following month
The hospital was constructed using $18,000,000 in debt, payable in monthly installments over 25 years at 6% annual interest
It recognizes $445,000 in straight line depreciation expense each month. Depreciation is not funded.
The Board of Directors has approved the following Capital Expenditure budget for Fiscal 2018:
Item		Cost		Projected Purchase Date
Lab Chemistry Analyzer		$250,000		9/30/17
Replace CT Scanner			1,050,000	11/30/17
Replace two Anesthesia Machines			775,000	4/30/18
Total			$2,075,000