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Social Media, Inc

Accounting

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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  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

Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the number of users to allocate administrative costs.

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

compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the number of users to allocate administrative costs.

 

Predetermined overhead rate per user

 

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

 

Service Profit

Toot!

TiX