1. Lambda Services

Scenario: Cost Allocation and Service Profitability

Data: Lambda Services offers IT consulting services and uses cost allocation to assess service profitability. The company reported the following financial data for the year 2023:

• Total Revenue: $2,000,000
• Direct Costs: $800,000
• Indirect Costs: $300,000

Requirements: Allocate Lambda Services' indirect costs to its service lines based on a cost allocation methodology. Calculate the profitability margin for each service line after allocating indirect costs. Analyze the impact of cost allocation on Lambda Services' service line profitability. Discuss the benefits of cost allocation in improving decision-making and resource allocation. Evaluate Lambda Services' overall profitability and recommend strategies to enhance profitability and cost efficiency.