Business, 18.05.2021 01:10 amselah735

Social Media, Inc. (SMI) has two services for users. Toot!, which connects tutors with students who are looking for tutoring services, and TiX, which can be used to buy, sell, or exchange event tickets. For the following year, SMI expects the following results. Toot! TiX Total
Users 16,100 22,600 38,700
Revenues $ 2,050,000 $ 2,160,000 $ 4,210,000
Engineering hours 10,675 8,675 19,350
Engineering cost $ 932,750 $ 1,050,625 $ 1,983,375
Administrative costs $ 1,586,700

The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product profits.

The company is considering using Engineering Hours and Users as the allocation base. Additional information follows.

Toot! TiX Total
Engineering hours 10,675 8,675 19,350
Users 16,100 22,600 38,700
Engineering-hour related administrative cost $ 208,980
User-related administrative cost $ 1,377,720

Required:

a. Compute the predetermined overhead rate used to apply the two administrative costs pools to the two services assuming SMI uses the proposed two-stage cost system to allocate administrative costs.

b. Based on the rates computed in requirement (a), what is the profit for each service?

Answers: 3

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Social Media, Inc. (SMI) has two services for users. Toot!, which connects tutors with students who...

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