Grady and Associates performs a variety of activities related to information systems and e$-$commerce consulting in Toronto, Canada. The firm, which bills $$174$ per hour for services performed, is in a very tight local labor market and is having difficulty finding quality help for its overworked professional staff. The cost per hour for professional staff time is $$84.$ Selected information follows.

Billable hours to clients for the year totaled $9,400,$ consisting of information systems services, $5,640$; e$-$commerce consulting, $3,760.$

Administrative cost of $$432,760$ was $($and continues to be$)$ allocated to both services based on billable hours. These costs consist of staff support, $$229,440$; in$-$house computing, $$162,000$; and miscellaneous office charges, $$41,320.$

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:

Descriptions Information Systems Services E$-$Commerce Consulting Total

Number of clients $280100380$

Number of computer hours $4,0902,4406,530$

Number of client transactions $8208901,710$

Required:

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.

Assume that the firm uses activity$-$based costing. 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.

Jeffrey Grady, one of the firm$$s partners, doesn$$t care where his professionals spend their time because, as he notes, $$many clients have come to expect both services and we need both to stay in business. Also, information systems and e$-$commerce professionals are paid the same hourly rate.$$ Should Grady$$s attitude change?