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: Patient registration and records $ 4.00 per office visit (of any length) All other overhead and administrative expenses $7.50 per direct professional labor hour
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: Patient registration and records $ 4.00 per office visit (of any length) All other overhead and administrative expenses $7.50 per direct professional labor hour
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
| Patient registration and records | $ 4.00 per office visit (of any length) |
| All other overhead and administrative expenses | $7.50 per direct professional labor hour |
Transcribed Image 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
Transcribed Image 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
$
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