Cost Allocation and Revenue Recognition at Facebook

• Values:
  • Total Costs: $80,000,000
  • Revenue Earned: $120,000,000
  • Number of Users: 1,000,000,000
  • Cost Allocation Bases: Active Users, Revenue
• Requirements:

1. Allocate costs using active users as the allocation base for Facebook.
2. Allocate costs using revenue as the allocation base for Facebook.
3. Discuss the impact of cost allocation methods on financial reporting.
4. Analyze how revenue recognition principles apply to Facebook’s business model.