Reference no: EM132735814

Social Media, Inc. (SMI) has two services for users. Toot!, which connects t 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                         7,100          15,100       22,200
Revenues                    $1,300,000   $920,000   $2,220,000
Engineering hours           10,400          6,400       16,800
Engineering cost             $250,000   $370,000       $620,000
Administrative costs $577,200

Required:

Problem 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.

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