The Pitt Corporation Has Been Outsourcing Data Processing in the Belief

question 132

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 calculated and compared to the price of the outside supplier.The price of the outside supplier was lower,so the outside bid was accepted.
Required:
Explain why Pitt's profitability has not shown improvement in terms of the cost-allocation method used.
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Definitions:

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