6-58 (Algo) Predetermined Rates and Product Profitability: Two Stage Cost Allocation (LO 6-3, 4,5) 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. Users Revenues Engineering hours Engineering cost Administrative costs Toot! 15,000 $2,250,000 17,000 $ 340,000 Tix 20,000 $1,000,000 11,000 Total 35,000 $3,250,000 28,000 $ 372,500 $ 712,500 $ 512,500 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. Engineering hours Toot! 17,000 Users 15,000 Tix 11,000 20,000 Total 28,000 35,000 Engineering-hour related administrative cost User-related administrative cost $ 140,000 $ 372,500 SMI thought that maybe there should be three types of administrative costs. They felt that some of the costs in the User-related pool were more related to revenue than to users. Specifically, they revised their breakdown of administrative costs as follows. Engineering-hour related administrative cost User-related administrative cost Revenue-related administrative cost Total administrative cost $ 140,000 210,000 162,500 $ 512,500 Required: a. Compute the predetermined overhead rate used to apply the three administrative costs pools to the two services assuming SMI uses the the proposed two-stage cost system to allocate administrative costs. Required: a. Compute the predetermined overhead rate used to apply the three administrative costs pools to the two services assuming SMI uses the 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 three administrative costs pools to the two services assuming SMI uses the the proposed two-stage cost system to allocate administrative costs. (Round your final answer to 2 decimal places.) Predetermined Overhead Rate Engineering-hour related administrative cost $ 8.75 per engineering-hour User-related administrative cost Revenue-related administrative cost per user % of revenue Required: a. Compute the predetermined overhead rate used to apply the three administrative costs pools to the two services assuming SMI uses the 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? Service Toot! Profit TiX