Question: Amazon Web Services (AWS) and Alibaba Cloud are prominent providers of cloud computing services. They allocate their overhead costs using activity-based costing (ABC) methods. Scenario:

Amazon Web Services (AWS) and Alibaba Cloud are prominent providers of cloud computing services. They allocate their overhead costs using activity-based costing (ABC) methods.

Scenario: AWS and Alibaba Cloud have identified two primary activities driving their overhead costs: server maintenance and data transfer.

Activity

Amazon AWS

Alibaba Cloud

Server Maintenance

$150 million

$120 million

Data Transfer

$100 million

$80 million

Additionally:

  • Total Servers (Amazon AWS): 200,000
  • Total Servers (Alibaba Cloud): 150,000
  • Total Data Transferred (Amazon AWS): 500 petabytes
  • Total Data Transferred (Alibaba Cloud): 400 petabytes

Requirements:

  1. Calculate the overhead cost allocation rate per server for both Amazon AWS and Alibaba Cloud.
  2. Determine the overhead cost allocation rate per petabyte of data transferred for both companies.
  3. Analyze the differences in overhead cost allocation methods between Amazon AWS and Alibaba Cloud.

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