Cost Allocation and Transfer Pricing at Microsoft

Requirements:

1. Implement an appropriate cost allocation method to allocate indirect costs among Microsoft's various product lines (e.g., Windows, Office, Azure).

Product Line	Direct Costs ($)	Indirect Costs ($)
Windows	15,000,000	6,000,000
Office	12,000,000	4,800,000
Azure	20,000,000	8,000,000

2. Determine transfer pricing for internal transactions between Microsoft's development and marketing divisions.
3. Evaluate the impact of different transfer pricing methods (e.g., market-based, cost-plus) on profitability.
4. Recommend a transfer pricing policy that aligns with corporate strategy and minimizes tax liabilities.