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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		12,500			19,600			32,100
Revenues	$	1,750,000		$	1,680,000		$	3,430,000
Engineering hours		9,025			7,025			16,050
Engineering cost	$	642,875		$	761,500		$	1,404,375
Administrative costs							$	1,123,500

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		9,025			7,025			16,050
Users		12,500			19,600			32,100
Engineering-hour related administrative cost							$	154,080
User-related administrative cost							$	969,420

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 systemto allocate administrative costs.

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

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