Metropolitan Dental Associates is a large dental practice in Chicago. The firm’s controller is preparing the budget for the next year. The controller projects a total of 48,000 office visits, to be...

Metropolitan Dental Associates is a large dental practice in Chicago. The firm’s controller is preparing the budget for the next year. The controller projects a total of 48,000 office visits, to be evenly distributed throughout the year. Seventy percent of the visits will be half-hour appointments, and the remainder will be one-hour visits. The average rates for professional dental services are $50 for half-hour appointments and $110 for one-hour office visits. Ninety percent of each month’s professional service revenue is collected during the month when services are rendered, and the remainder is collected the month following service. Uncollectible billings are negligible. Metropolitan’s dental associates earn $80 per hour.


Metropolitan uses activity-based budgeting to budget office overhead and administrative expenses. Two cost drivers are used: office visits and direct professional labor. The cost-driver rates are as follows:

Extracted text: Professional services in June: One-hour visits 1,200 hours Half-hour visits 2,800 X hours Total direct professional labor 4,000 hours Hourly rate for dental associates $ 80 Total direct professional labor cost $ 320,000


Extracted text: May June Half-hour visits Billing rate 2$ 50 2$ 50 Total billings for half-hour visits 2$ 2$ One-hour visits 1,200 1,200 Billing rate $ 110 $ 110 Total billings for one-hour visits 132,000 $ 132,000 Total billings during month Percentage of month's billings collected during June % 90 % Collections during June Total collections in June $