Reference no: EM132658506
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 10,100 17,600 27,700
Revenues $ 1,550,000 $ 1,360,000 $ 2,910,000
Engineering hours 7,925 5,925 13,850
Engineering cost $ 477,125 $ 596,250 $ 1,073,375
Administrative costs $ 858,700
Required:
Question a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the number of users to allocate administrative costs.
Question b. Based on the rates computed in requirement (a), what is the profit for each service?