1. Harmon Recycling Services (HRS), a not-for-profit organization, has two drop-off centers, Westside and Eastside. The company is considering using a two-stage cost allocation system and wants to assess the effects on reported product profits.

More detailed financial information for HRS follows:

	Eastside	Westside	Total
Clients	25,000	6,250	31,250
Revenues	$ 270,000	$ 180,000	$ 450,000
Staff hours	8,100	2,700	10,800
Staff costs	$ 99,000	$ 81,000	$ 180,000
General operating costs:
User-related			$ 135,000
Staff-related			135,000
Total general operating costs			$ 270,000

The company plans to use Clients to allocate user-related costs and Staff Costs to allocate staff-related costs.

An accounting student from the local college working on a related project at HRS as a part of a course, suggested a further revision after an analysis of the general operating accounts. Specifically, the student suggested that the staff-related costs should be separated into two cost pools instead of one. One pool would be allocated based on staff hours and the other pool allocated based on staff costs.

The general operating costs could be summarized as follows:

User-related operating costs	$ 135,000
Staff hour-related operating costs	108,000
Staff cost-related operating cost	27,000
Total general operating cost	$ 270,000

Required

a. Compute the predetermined overhead rate used to apply the three general operating cost pools to the two centers (Eastside and Westside) assuming HRS uses the student's proposed two-stage cost system to allocate general operating costs.

b. Based on the rates computed in requirement (a), what is the surplus (revenues minus costs) for each service?