Social Media, Inc. (SMI) has two services for users. Toot!,which connects people with students who are looking for tutoringservices, and TiX, which can be used to buy, sell, or exchangeevent tickets. For the following year, SMI expects the followingresults.
|
| Toot! | TiX | Total |
| Users | | 9,000 | | | 15,000 | | | 24,000 | |
| Revenues | $ | 1,200,000 | | $ | 800,000 | | $ | 2,000,000 | |
| Engineering hours | | 10,000 | | | 6,000 | | | 16,000 | |
| Engineering cost | $ | 240,000 | | $ | 360,000 | | $ | 600,000 | |
| Administrative costs | | | | | | | $ | 480,000 | |
|
Required:
a. Compute the predetermined overhead rate usedto apply administrative costs to the two services assuming SMI usesthe engineering hours to allocate administrativecosts.
b. Based on the rates computed in requirement(a), what is the profit for each service?
C. Compute the predetermined overhead rate usedto apply administrative costs to the two services assuming SMI usesthe engineering cost to allocate administrative costs.
D. Based on the rates computed in requirement(c), what is the profit for each service?
