Microsoft Corporation integrates Lean principles into its software development processes. The COGS for software development includes costs of software engineering, allocated costs of IT infrastructure, and administrative overhead. For the current development cycle:

Requirements:

• Calculate the COGS for software development using the formula: COGS = Software Engineering Costs + Allocated IT Costs + Administrative Overhead.
• Detail the COGS components in a table format.
• Recommend strategies to reduce COGS, such as enhancing automation and optimizing development workflows.
• Justify how reducing COGS aligns with Lean software development principles.
• Provide a numerical example with hypothetical values demonstrating the calculation of COGS and potential savings.

COGS Table:

Category	Amount ($)
Software Engineering Costs	X
Allocated IT Infrastructure	Y
Administrative Overhead	Z
Total COGS	X + Y + Z

Numerical Example:

• Software Engineering Costs: $8,000,000
• Allocated IT Costs: $2,000,000
• Administrative Overhead: $1,000,000
• COGS = $8,000,000 + $2,000,000 + $1,000,000 = $11,000,000

Microsoft aims to reduce COGS by 20% through process optimizations, potentially saving $2,200,000 annually.