Activity-Based Costing at Microsoft

• Values:

• Total Overhead Costs: $25,000,000
• Cost Driver Units: 500,000
• Number of Activities: 5
• Activity Cost Pools: Development, Testing, Marketing
• Requirements:

0. Allocate overhead costs using the ABC method.
1. Compare the results of ABC with traditional costing.
2. Discuss the benefits of ABC in software development.
3. Recommend improvements to Microsoft’s cost allocation practices.