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 13,700 20,600 34,300 Revenues $ 1,850,000 $ 1,840,000 $ 3,690,000 Engineering hours 9,575 7,575 17,150 Engineering cost $ 734,000 $ 852,375 $ 1,586,375 Administrative costs $ 1,269,100 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 9,575 7,575 17,150 Users 13,700 20,600 34,300 Engineering-hour related administrative cost $ 171,500 User-related administrative cost $ 1,097,600 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 system to allocate administrative costs. b. Based on the rates computed in requirement (a), what is the profit for each service?

College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

Chapter1: Asset, Liability, Owner’s Equity, Revenue, And Expense Accounts

Section: Chapter Questions

Problem 2QY

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Question

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		13,700			20,600		34,300
Revenues	$	1,850,000		$	1,840,000	$	3,690,000
Engineering hours		9,575			7,575		17,150
Engineering cost	$	734,000		$	852,375	$	1,586,375
Administrative costs						$	1,269,100

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		9,575		7,575		17,150
Users		13,700		20,600		34,300
Engineering-hour related administrative cost					$	171,500
User-related administrative cost					$	1,097,600

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 system to allocate administrative costs.

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

Tix
Total
34,300
$3,690,000
17,150
$1,586, 375
$1, 269, 100
Toot!
13,700
$1,850,000
9,575
$ 734,000
Users
20,600
$1,840,000
7,575
$ 852,375
Revenues
Engineering hours
Engineering cost
Administrative costs
The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product prof
The company is considering using Engineering Hours and Users as the allocation base. Additional information follows.
Toot!
9,575
13,700
TiX
Total
17,150
34,300
$ 171,500
$1,097,600
Engineering hours
Users
7,575
20,600
Engineering-hour related administrative cost
User-related administrative cost
Required:
a. Compute the predetermined overhead rate used to apply the two administrative costs pools to the two services assuming SI
the proposed two-stage cost system to allocate administrative costs.
b. Based on the rates computed in requirement (a), what is the profit for each service?
Complete this question by entering your answers in the tabs below.
Required A
Required B
Based on the rates computed in requirement (a), what is the profit for each service? (Do not round intermediate calculations.)
Service
Profit
Toot!
TiX

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.
Tix
20,600
$1,840,000
7,575
$ 852,375
Toot!
Total
13,700
$1,850,000
9,575
$ 734, 000
Users
34,300
$3,690,000
17,150
$1,586, 375
$1, 269, 100
Revenues
Engineering hours
Engineering cost
Administrative costs
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.
Total
17,150
34,300
$ 171,500
$1,097,600
Toot!
Tix
Engineering hours
Users
Engineering-hour related administrative cost
User-related administrative cost
9,575
13,700
7,575
20,600
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 system to allocate administrative costs.
b. Based on the rates computed in requirement (a), what is the profit for each service?
Complete this question by entering your answers in the tabs below.
Required A
Required B
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. (Round your answers to 2 decimal places.)
Predetermined Overhead Rate
Engineering-hour related administrative cost
per engineering-hour
User-related administrative cost
per user

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