Refer to the information in Exercise 6-43 and Problem 6-57. SMI thought that maybe there should be
Question:
Refer to the information in Exercise 6-43 and Problem 6-57. 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 .......$ 120,000
User-related administrative cost ................................210,000
Revenue-related administrative cost .........................150,000
Total administrative cost ...........................................$480,000
Required
a. Compute the predetermined overhead rate used to apply the three administrative costs pools to the two services assuming SMI uses 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?
Exercise 6-43
Step by Step Answer:
Fundamentals of Cost Accounting
ISBN: 978-1259969478
6th edition
Authors: William N. Lanen, Shannon Anderson, Michael W Maher