Metropolitan Dental Associates is a large dental practice in Chicago. The firm\'
ID: 2561642 • Letter: M
Question
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 36,000 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 $75 for half-hour appointments and $130 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 $110 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 All other overhead and administrative expenses $3.00 per office visit (of any length) $8.00 per direct professional labor hour Required 1. Prepare the direct-professional-labor budget schedule for the month of June. 2. Prepare the budget schedule for cash collections during June for professional services rendered during May and June. 3. Prepare the overhead and administrative expense budget schedule for the month of June.Explanation / Answer
Answer 1 Total No.of visits for the month of June = 36000/12 = 3000 visits Half Hour assignments = 70% of 3000 visits = 2100 visits One hour visits = 3000 - 2100 = 900 visits Direct professional Labour budget for the month of June June Half Hour assignments = 2100 visits * $75 = $157,500 One Hour assignments = 900 visits * $130 = $117,000 Direct professional Labour budget for the month of June $274,500 Answer 2 Total No.of direct professional labour hours = (2100 /2) + 900 = 1950 hours Preparation of budget schedule for cash collection during June for professional services rendered June May service revenue collection - [1950 hours * $110]*10% $21,450 June service revenue collection - [1950 hours * $110]*90% $193,050 Cash collection budget for June $214,500 Answer 3 Overhead and administrative expense budget schedule for month of June June Patient registration and records (3000 visits * $3) $9,000 All other oveheads and administrative expenses (1950 hours * $8) $15,600 Overhead and administrative expense budget schedule for month of June $24,600