Reference no: EM132660988

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                         11,300           18,600                29,900

Revenues                  $ 1,650,000       $ 1,340,000         $ 2,990,000

Engineering hours           11,800           7,800               19,600

Engineering cost         $ 285,000       $ 405,000             $ 690,000

Administrative costs $ 986,700

Required:

Problem a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the revenue to allocate administrative costs.

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