Question

Exercise 9-30 Professional Services Budget; Dental Practice; Activity-Based Budgeting (LO 9-3, 9-4, 9-5) 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 All other overhead and administrative expenses $4.00 per office visit (of any length) $7.50 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.

Answer 1

1)
	Professional services in June :
	One-hour visits				1200
	Half- hour visits				1400
	total direct professional labor				2600
	Hourly rate for dental associates				110
	total direct professional labor cost				286000
2)						May	June
	Half-hour visits					2800	2800
	Billing rate					50	50
	Total billings for half-hour visits					140000	140000
	one-hour visits					1200	1200
	Billing rate					110	110
	total billings for one-hour visits					132000	132000
	total billing during month					272000	272000
	percentage of month's billings collected during June					10%	90%
	Collections during June					27200	244800
	total collections in june						272000
3)
	Patient registration and records					16000
	Other overhead and administrative expenses					19500
	Total overhead and administrative expenses					35500