The Pitt Corporation Has Been Outsourcing Data Processing in the Belief

question 110

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 and thus, 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:

Scrum Approach

A framework utilized in agile software development where teams work in short sprints to complete predetermined portions of work, allowing for quick adjustments based on feedback.

Agile Development

A software development methodology characterized by iterative progress, flexibility, and collaboration.

Scrum Sprints

Short, consistent periods used in Scrum methodology during which specific work has to be completed and made ready for review.

Weeks

Time units consisting of seven days, used universally as a standard component of measuring longer periods like months and years.