IBM implements activity-based costing (ABC) for its software development division. In October 2038, the company identifies the following cost drivers and activities:

• Software Development Hours: 50,000 hours
• Testing Hours: 20,000 hours
• Overhead Costs: $10,000,000

Requirements:

• Allocate overhead costs using activity-based costing.
• Calculate the cost per activity.
• Prepare a cost allocation report.
• Analyze the benefits of using ABC over traditional costing methods.
• Recommend process improvements based on ABC analysis.