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

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Toot! TiX Total Engineering hours 10,000 6,000 16,000 Users 9,000 15,000 24,000 Engineering-hour related administrative cost $ 120,000 User-related administrative $360,000 cost