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!TiXTotalUsers 12,500 19,600 32,100Revenues$1,750,000$1,460,000$3,210,000Engineering hours 12,200 8,200 20,400Engineering cost$295,000$415,000$710,000Administrative costs $1,123,500 Required:a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the revenue to allocate administrative costs.b. Based on the rates computed in requirement (a), what is the profit for each service?

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Answered: a. Compute the predetermined overhead…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

ChapterMB: Model-building Problems

Section: Chapter Questions

Problem 15M

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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	$	1,460,000	$	3,210,000
Engineering hours		12,200		8,200		20,400
Engineering cost	$	295,000	$	415,000	$	710,000
Administrative costs					$	1,123,500

Required:

a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the revenue to allocate administrative costs.

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

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