Refer to the information in Exercise 6-43 for Social Media, Inc. (SMI). 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.

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?

Exercise 6-43

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TiX Toot! Total Engineering hours 6,000 10,000 16,000 9,000 Users 15,000 24,000 Engineering-hour related administrative cost $ 120,000 User-related administrative $360,000 cost