Google and Microsoft are leading providers of cloud computing services, offering a wide range of solutions to businesses and individuals worldwide. Both companies allocate their overhead costs using activity-based costing (ABC).

Scenario: Google and Microsoft have identified two primary activities driving their overhead costs: server maintenance and customer support.

• Server Maintenance Activity:
  • Total Costs (Google): $100 million
  • Total Costs (Microsoft): $120 million
  • Allocation Base: Number of Servers
  • Total Servers (Google): 100,000
  • Total Servers (Microsoft): 120,000
• Customer Support Activity:
  • Total Costs (Google): $80 million
  • Total Costs (Microsoft): $100 million
  • Allocation Base: Number of Customer Inquiries
  • Total Inquiries (Google): 8 million
  • Total Inquiries (Microsoft): 10 million

Requirements:

1. Calculate the overhead cost allocation rate for server maintenance for both Google and Microsoft.
2. Determine the overhead cost allocation rate for customer support for both companies.
3. Analyze the differences in overhead cost allocation strategies between Google and Microsoft.