Problem 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! 9,000 $1,350,000 9,000 $ 18 , Tix 11,000 $1,100,000 6,000 $ 396,000 Total 20, eee $2,45 , 15,000 $ 576,000 $ 516,000 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 Users Engineering-hour related administrative cost User-related administrative cost Toot! 9 , 9,000 Tix 6 , 11, eee Total 15, eee 2 , $ 120,000 $ 396,000 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 $ 120,000 200,000 196,000 $ 516,000 Sub 40 Saved Help Save & Exit 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 $ 12 , 2 , 196,000 $ 516,000 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 SMI uses the the proposed two-stage cost system to allocate administrative costs. (Round your final ansi places.) Engineering-hour related administrative cost User-related administrative cost Revenue-related administrative cost Predetermined Overhead Rate per engineering-hour per user % of revenue Roomed A Required B > SMI thought that maybe there should be three types of administrative costs. They felt that some or 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 $ 120,000 200,000 196, eee $ 516,000 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 Profit Tool TIX
