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ConsultingCo uses activity-based costing to allocate its overhead costs across two service lines: Strategy Consulting and IT Consulting. The following table summarizes the costs and
- ConsultingCo uses activity-based costing to allocate its overhead costs across two service lines: Strategy Consulting and IT Consulting. The following table summarizes the costs and cost drivers:
Service Line | Total Costs ($) | Cost Driver | Cost Driver Quantity |
Strategy Consulting | $400,000 | Number of projects | 200 projects |
IT Consulting | $300,000 | Number of hours | 15,000 hours |
Total | $700,000 |
- Strategy Consulting completed 50 projects, and IT Consulting delivered 10,000 hours of service.
a. Allocate ConsultingCo's overhead costs to Strategy Consulting and IT Consulting using activity-based costing. b. Calculate the cost per project for Strategy Consulting and cost per hour for IT Consulting based on the allocated costs. c. Discuss which service line incurs higher costs per unit and explain the implications for pricing and profitability.
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