Reference no: EM131565816

Problem -

Clark and Shiffer LLP perform activities related to e-commerce consulting and information systems in Vancouver, British Columbia. The firm, which bills $160 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 $70. Selected information follows.

• Billable hours to clients for the year totaled 8,000, consisting of: information systems services, 4,800; e-commerce consulting, 3,200.
• Administrative cost of $411,760 was (and continues to be) allocated to both services based on billable hours. These costs consist of staff support, $220,200; in-house computing, $155,000; and miscellaneous office charges, $36,560.

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:

	E-Commerce Consulting	Information Systems Services	Total
Number of clients	65	245	310
Number of computer hours	2,300	3,600	5,900
Number of client transactions	820	680	1,500

1. Assume that the firm uses traditional costing procedures, allocating total costs on the basis of billable hours. Determine the profitability of the firm's e-commerce and information systems activities, expressing your answer both in dollars and as a percentage of activity revenue.

2. Using activity-based costing, determine the profitability of the firm's e-commerce and information systems activities, expressing your answer both in dollars and as a percentage of activity revenue.