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Toot! TiX Total Users 16,700 23,100 39,800 Revenues $ 2,100,000 $ 1,880,000 $ 3,980,000 Engineering hours 13,600 9,600 23,200 Engineering cost $ 330,000 $ 450,000 $ 780,000 Administrative costs $ 1,671,600 Required: a. Compute the predetermined overhead rate used to apply administrative costs to the two services assuming SMI uses the revenue to allocate administrative costs. b. Based on the rates computed in requirement (a), what is the profit for each service?

Respuesta :

facundobuzzetti

Answer:

Instructions are below.

Explanation:

First, we need to calculate the revenue proportion:

Toot!= 2,100,000/3,980,000= 0.53

TiX= 1,880,000/3,980,000= 0.47

Now, we can allocate administrative costs:

Toot!= 0.53*1,671,600= $885,948

TiX= 0.47*1,671,600= $785,652

Finally, the total, and unitary profit per product:

Toot!:

Revenues= 2,100,000

Engineering cost= (330,000)

Administrative costs= (885,948)

Total profit= $884,052

Unitary profit= 884,052/16,700= $52.937

TiX:

Revenues= 1,880,000

Engineering cost= (450,000)

Administrative costs= (785,652)

Total profit= $644,348

Unitary profit= 644,348/23,100= $27.894

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