Info for the questions below. Please respond ASAP

WWWEb Marketing is a decentralized firm specializing in designing and operating internet marketing websites. The firm is 4 yrs old and is rapidly growing but shows only a small profit. They have 3 profit centers: Design Division, Server operations, and the crawler division. The design division devises the internet marketing strategies for external clients including innovative websites and marketing strategies. Server operations maintains the clients servers. The crawler division operates WWWebs proprietary search engine that clients can use for internet based marketing research. In addition to these 3 profit centers WWWeb has an IT group that maintains WWWWebs servers and telecommunication lines to the internet.

The IT group is a cost center. The current annual IT Budget is $548,000 for personnel, hardware and software leases for the servers and telecommunications cost. The cost of the IT group is not allocated back to the 3 divisions. The CEO of WWWeb's argues that the IT group is a common (shared) resource and is essentially a fixed cost. Adding another client website or performing a Web search does not generate any additional IT cost to the firm because WWEB's IT group has excess capacity. WWWEBS CEO argues, "Any Change for IT back to the divisions will cause the divisions to avoid using our IT resources. As long as we have unused capacity on our systems we should be encouraging our people to use that capacity."

WWWeb currently uses about 80 percent of the capacity of its servers, routers and fiber optic high speed lines to the internet. The high speed lines are the "pipes" through which all client server web traffic flows. These high speed lines are also used by WWeb's email traffic and the Crawler Divisions marketing research web searches. Currently, the IT systems are performing well WWWeb users experience few delays and minimal interference. However, the 3 profit center managers are projecting growth in their businesses and expect to reach capacity on their servers and communication lines within 12 months. This will cause significant service degradation.

Jose Coronos, head of WWeb's IT group has called a ameeting of the 3 division managers to discuss the terrific deals being offered by telecom companies and hardware providers. WIth the economy slump WWWb can roughly double the capacity on its servers and high speed access lines and lock in these low rates for 2 years. The incremental cost of of doubling the IT groups capacity is to raise its hardware and lease cost s and access line cost by 20%. IT currently spends $18000a month on hardware leases and access lines. If it were to double its existing capacity, the total monthly cost would rise to $21600. Jose Corronos believes his existing IT personnel can handle the additional server and line capacity. He and the 3 managers recommend that WWWeb acquire the additional capacity and lock in these rates.

REQUIRED

A. Analyze WWWeb's current policy of how the 3 divisions are charged for IT costs and whether WWWeb should acquire the additional capacity.

B. Should WWWeb change its policy of how it charges IT costs to the divisions? If so, What changes do you recommend