Question
Grady and Associates performs a variety of activities related to information systems and e-commerce consulting in Toronto, Canada. The firm, which bills $156 per hour
Grady and Associates performs a variety of activities related to information systems and e-commerce consulting in Toronto, Canada. The firm, which bills $156 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 $66. Selected information follows.
- Billable hours to clients for the year totaled 7,600, consisting of information systems services, 4,560; e-commerce consulting, 3,040.
- Administrative cost of $405,760 was (and continues to be) allocated to both services based on billable hours. These costs consist of staff support, $217,560; in-house computing, $153,000; and miscellaneous office charges, $35,200.
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 | E-Commerce Consulting | Total | |||||||||
Number of clients | 280 | 100 | 380 | ||||||||
Number of computer hours | 3,460 | 2,260 | 5,720 | ||||||||
Number of client transactions | 640 | 800 | 1,440 | ||||||||
Required:
3. Assume that the firm uses activity-based costing. Determine the profitability of the firms e-commerce and information systems activities, expressing your answer both in dollars and as a percentage of activity revenue.
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