The Pitt Corporation Has Been Outsourcing Data Processing in the Belief

question 125

Essay

The Pitt Corporation has been outsourcing data processing in the belief that such outsourcing would reduce costs and increase corporate profitability. In spite of this, there has been no meaningful increase in corporate profitability.
Previously, Pitt used a single-rate method to allocate data processing costs. A per unit cost for data processing was computed and compared to the price of the outside supplier. The price of the outside supplier was lower, so the outside bid was accepted.
Required:
Formulate a possible reason why Pitt's profitability has not shown improvement in terms of the cost allocation method used.

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Definitions:

Collective Programming

Involves multiple programmers working together on the same codebase in real-time, often to enhance creativity and problem-solving.

Indicate Numbers

The process of representing or denoting numbers, often for the purpose of analysis or comparison.

Cultural Practices

The patterns of behavior accepted by a society that reflect its traditions, beliefs, and values.

Feasible

Practical and possible to do easily or conveniently.