Reference no: EM132658506

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                                         10,100            17,600              27,700

Revenues                                  $ 1,550,000         $ 1,360,000   $ 2,910,000

Engineering hours                        7,925               5,925                  13,850

Engineering cost                      $ 477,125            $ 596,250             $ 1,073,375

Administrative costs $ 858,700

Required:

Question a. 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.

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