Clark and Shiffer LLP perform activities related to e-commerceconsulting and information systems in Vancouver, British Columbia.The firm, which bills $162 per hour for services performed, is in avery tight local labor market and is having difficulty findingquality help for its overworked professional staff. The cost perhour for professional staff time is $72. Selected informationfollows. • Billable hours to clients for the year totaled 8,200,consisting of: information systems services, 4,920; e-commerceconsulting, 3,280. • Administrative cost of $414,760 was (andcontinues to be) allocated to both services based on billablehours. These costs consist of staff support, $221,520; in-housecomputing, $156,000; and miscellaneous office charges, $37,240. Arecent analysis of staff support costs found a correlation with thenumber of clients served. In-house computing and miscellaneousoffice charges varied directly with the number of computer hourslogged and number of client transactions, respectively. Atabulation revealed the following data:
| E-Commerce Consulting | Information
Systems
Services | Total |
| Number of clients | 70 | | 250 | | 320 |
| Number of computer hours | 2,320 | | 3,670 | | 5,990 |
| Number of client transactions | 830 | | 700 | | 1,530 |
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Assume that the firm uses traditional costing procedures,allocating total costs on the basis of billable hours. Determinethe profitability of the firm’s e-commerce and information systemsactivities, expressing your answer both in dollars and as apercentage of activity revenue. (Do not round intermediatecalculations. Round "Profitability" to 2 decimalplaces.) |
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Using activity-based costing, determine the profitability of thefirm’s e-commerce and information systems activities, expressingyour answer both in dollars and as a percentage of activityrevenue. (Round intermediate calculations and final answersto 2 decimal places.) |
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