Cost Allocation and Revenue Recognition at Netflix

• Values:
  • Total Costs: $120,000,000
  • Revenue Earned: $250,000,000
  • Number of Users: 180,000,000
  • Cost Allocation Bases: Active Users, Revenue

• Requirements:
  1. Allocate costs using active users as the base.
  2. Allocate costs using revenue as the base.
  3. Discuss the impact of cost allocation on financial reporting.
  4. Analyze how revenue recognition principles apply to Netflix.