Social Media, Inc. (SMI) has two services for users. Toot!, which connects tutors with students...
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Accounting
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!TiXTotalUsers17,90024,10042,000Revenues$2,200,000$2,400,000$4,600,000Engineering hours11,5009,50021,000Engineering cost$1,096,250$1,213,750$2,310,000Administrative costs$1,848,000
Required:
a.Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses thenumber of usersto allocate administrative costs.
b.Based on the rates computed in requirement (a), what is the profit for each service?
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