PR $5-50($Algo$)$ Activity$-$Based Costing; Analysis of Operations $($LO $5-1,5-2,5-4,5-5,5-7,5-10)$

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:

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?

Complete this question by entering your answers in the tabs below.

Required $2$

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.

Note: Do not round intermediate calculations. Round income to the nearest whole dollar and profitability to $2$ decimal places

$($i$.$e$.1234=12*34\%).$

Complete this question by entering your answers in the tabs below.

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.

Note: Round "Profitability" to $2$ decimal places $($i$.$e $.1234=12\mathrm{.}34\%)$

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?