I'm having trouble determining the profitability of the firm's information systems services and e-commerce consulting activities in problem 3. Could you help me solve this problem? I'm confused by the activity-based costing system and need to find the total billings, income, and profitability percentage. ### Activity-Based Costing Analysis for Information Systems and E-commerce Consulting3. **Instruction**: 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.4. **Discussion Point**: Jeffrey Grady, a partner at the firm, notes that many clients expect both services. He believes it is essential for business sustainability and mentions that professionals in both areas receive the same hourly rate. Should this perspective on resource allocation be reconsidered?#### TaskComplete this analysis by entering your answers in the tabs provided below.#### Analysis Table| Department | Total Billings | Income | Profitability ||--------------------------------|----------------|--------|---------------|| Information systems services | | | % || E-commerce consulting | | | % |- **Instructions**: Assume the firm utilizes activity-based costing to determine the profitability of its services. Provide answers rounded to two decimal places.#### Navigation- **Previous Requirement** | **Next Requirement** # Problem 5-50 Activity-Based Costing; Analysis of OperationsGrady and Associates performs various activities related to information systems and e-commerce consulting in Toronto, Canada. The firm bills $168 per hour for services performed, operates in a tight labor market, and struggles to find quality help for its busy staff. The cost per hour for professional staff time is $78. Below is selected information:- **Billable hours to clients for the year:** 8,800 total (information systems services: 5,280; e-commerce consulting: 3,520).- **Administrative cost:** $423,760, allocated to services based on billable hours, including: - Staff support: $225,480 - In-house computing: $159,000 - Miscellaneous office charges: $39,280A recent analysis linked staff support costs to the number of clients served, while in-house computing and office charges varied with the number of computer hours and client transactions:| | Information Systems Services | E-Commerce Consulting | Total ||-------------------------|------------------------------|-----------------------|-------|| **Number of clients** | 265 | 85 | 350 || **Number of computer hours** | 3,880 | 2,380 | 6,260 || **Number of client transactions** | 760 | 860 | 1,620 |### Required Analysis2. **Traditional Costing:** Assume the firm uses traditional costing, allocating total costs based on billable hours. Determine the profitability of each activity in dollars and as a percentage of activity revenue.3. **Activity-Based Costing:** Assume the firm uses activity-based costing. Determine profitability in dollars and as a percentage of activity revenue for each activity.4. **Partner's View:** Jeffrey Grady, a partner, believes staff time is irrelevant since clients expect both services. He points out that both information systems and e-commerce professionals are paid the same hourly rate. Consider whether Grady's perspective should change.

Activity based costing is a method and type of costing, in which all indirect costs and indirect…

I'm having trouble determining the profitability of the firm's information systems services and e-commerce consulting activities in problem 3. Could you help me solve this problem? I'm confused by the activity-based costing system and need to find the total billings, income, and profitability percentage.

I'm having trouble determining the profitability of the firm's information systems services and e-commerce consulting activities in problem 3. Could you help me solve this problem? I'm confused by the activity-based costing system and need to find the total billings, income, and profitability percentage.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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### Activity-Based Costing Analysis for Information Systems and E-commerce Consulting

3. **Instruction**: 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.

4. **Discussion Point**: Jeffrey Grady, a partner at the firm, notes that many clients expect both services. He believes it is essential for business sustainability and mentions that professionals in both areas receive the same hourly rate. Should this perspective on resource allocation be reconsidered?

#### Task
Complete this analysis by entering your answers in the tabs provided below.

#### Analysis Table

| Department | Total Billings | Income | Profitability |
|--------------------------------|----------------|--------|---------------|
| Information systems services | | | % |
| E-commerce consulting | | | % |

- **Instructions**: Assume the firm utilizes activity-based costing to determine the profitability of its services. Provide answers rounded to two decimal places.

#### Navigation
- **Previous Requirement** | **Next Requirement**

# Problem 5-50 Activity-Based Costing; Analysis of Operations

Grady and Associates performs various activities related to information systems and e-commerce consulting in Toronto, Canada. The firm bills $168 per hour for services performed, operates in a tight labor market, and struggles to find quality help for its busy staff. The cost per hour for professional staff time is $78. Below is selected information:

- **Billable hours to clients for the year:** 8,800 total (information systems services: 5,280; e-commerce consulting: 3,520).
- **Administrative cost:** $423,760, allocated to services based on billable hours, including:
- Staff support: $225,480
- In-house computing: $159,000
- Miscellaneous office charges: $39,280

A recent analysis linked staff support costs to the number of clients served, while in-house computing and office charges varied with the number of computer hours and client transactions:

| | Information Systems Services | E-Commerce Consulting | Total |
|-------------------------|------------------------------|-----------------------|-------|
| **Number of clients** | 265 | 85 | 350 |
| **Number of computer hours** | 3,880 | 2,380 | 6,260 |
| **Number of client transactions** | 760 | 860 | 1,620 |

### Required Analysis

2. **Traditional Costing:** Assume the firm uses traditional costing, allocating total costs based on billable hours. Determine the profitability of each activity in dollars and as a percentage of activity revenue.

3. **Activity-Based Costing:** Assume the firm uses activity-based costing. Determine profitability in dollars and as a percentage of activity revenue for each activity.

4. **Partner's View:** Jeffrey Grady, a partner, believes staff time is irrelevant since clients expect both services. He points out that both information systems and e-commerce professionals are paid the same hourly rate. Consider whether Grady's perspective should change.

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