The Dentist Group is an upscale dental clinic with four service centers and three revenue centers. In order of utilization, the service centers are Administration, Housekeeping, Anesthesia, and Patient Accounting. The three revenue centers are General Dentistry, Oral Surgery, and Orthodontics. Administration’s costs are assigned based on the percentage of time spent. Housekeeping’s costs are assigned based on the number of square feet. Anesthesia’s costs are assigned based on the minutes of surgery. Patient Accounting’s costs are assigned based on the percentage of patient visits.

The following statistics have been collected:

Administration ............ $2,500
Housekeeping ............ 500
Anesthesia ............. 1,800
Patient Accounting .......... 1,200
General Dentistry ........... 8,000
Oral Surgery ............. 5,000
Orthodontics ............ 4,000
Total ...............$23,000
Required
1. Use the direct method of cost allocation to determine the three revenue centers’ overhead costs.
2. Use the step method of cost allocation to determine the three revenue centers’ overhead costs.
3. Compute departmental overhead rates for General Dentistry, Oral Surgery, and Orthodontics, assuming that the direct method of cost allocation is used and that the activity base is number of patient visits.
4. Compute departmental overhead rates for General Dentistry, Oral Surgery, and Orthodontics, assuming that the step method of cost allocation is used and that the activity base is number of patient visits.
5. Did each revenue center’s departmental overhead rates vary depending on the allocation method used? Did the total center costschange?

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Number Percentage Number Percentage Number Minutes Time Square Patient Visits Patient Visits Center Spent Feet Surgery Administration Housekeeping Anesthesia Patient 1,000 500 1,000 Accounting 10 30 10 20 100 3,500 2,500 5,000 2,000 1500 11,000 7,000 Oral Surgery Orthodontics 100 1,000