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Three Rivers Dental Associates (TRDA) is a large dental practice in Pittsburgh. The firm's controller is preparing the budget for the next year. The controller projects a total of 42,000 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 $100 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. TRDA's dental associates earn $80 per hour.
TRDA 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:
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