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 7,650 5,650 13,300 Users 9,500 17,100 26,600 Engineering – hour related administrative cost $ 114,380 User-related administrative cost $ 683,620 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.
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 7,650 5,650 13,300
Users 9,500 17,100 26,600
Engineering – hour related administrative cost $ 114,380
User-related administrative cost $ 683,620
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.
Predetermined overhead rate
Engineering-hour related administrative cost _______________ per engineering-hour
User-related administrative cost _______________ per user
Required B:
- Based on the rates computed in requirement (a), what is the profit for each service?
Service Profit
Toot! ________
TiX ________
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