Question

Check my work Grady and Associates performs a variety of activities related to Information systems and e-commerce consulting in Toronto, Canada. The firm, which bills $178 per hour for services performed, is in a very tight local labor market and is having difficulty finding quality help for its overworked professional staff. The cost per hour for professional staff time is $88. Selected Information follows. • Billable hours to clients for the year totaled 9,800, consisting of Information systems services, 5,880, e-commerce consulting, 3,920. • Administrative cost of $438,760 was (and continues to be) allocated to both services based on billable hours. These costs consist of staff support, $232,080; In-house computing. $164,000, and miscellaneous office charges, $42,680. A recent analysis of staff support costs found a correlation with the number of clients served, In-house computing and miscellaneous office charges varied directly with the number of computer hours logged and number of client transactions, respectively. A tabulation revealed the following data: Information Systems Services 255 1.230 E-Commerce Consulting Number of clients Number of computer hours Number of client transactions 2.480 Total 330 6,710 1,770 Required: 2. Assume that the firm uses traditional costing procedures, allocating total costs on the basis of billable hours. Determine the profitability of the firm's information systems and e-commerce activities, expressing your answer both in dollars and as a percentage of activity revenue. 3. Assume that the firm uses activity-based costing. Determine the profitability of the firm's e-commerce and Information systems activities, expressing your answer both in dollars and as a percentage of activity revenue. 4. Jeffrey Grady, one of the firm's partners, doesn't care where his professionals spend their time because, as he notes, "many clients have come to expect both services and we need both to stay in business. Also, Information systems and e-commerce professionals are all the came hur rata" Chrulnarare a le channe? < Prev 4 of 4 !! Next

Answer 1

Solution' to calculebe bhe pe delevmined ovevhecad we nee1 Nabe on khe basis & billable as Pollos, Pledekevmined Ovevheas Total ovex hecds Rake Total Bilable Houys 33,760 9200 TT Per billeble houy - Statement shousing Pyoitability Mhdev TYaditional COsbing systen Information E-COmmerce. System comsulting Services BILlable Houys 5,290 3,120 BI1lable Rae pev houY 178 $119 Revenues (Biile Hous x Rate $1ho46,Gu0 9T,760 Per hour Less StafP HOUYS COSts LBillable Hours yšg) SIT440 3u4,960) LessAaminisbyqbive costs ($u38160 9,200 S263,256 5, souj. X Billable Houvs 265944 $I77,216 Net Pyofi . Net pvoeik novginet pvofi Revennes 25.401 25.401 Deparbment Total Bilinggs pYofi babi liby Income Infovmation system $265,944 25.401 Seavices E Commexce consulting 697,750 111,296 25.407

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