Question

Describe the types of costs that are involved in the production of the company’s main products/services, for Amazon company.

Answer 1

It shall be noted that products & services of Amazon includes plethora of products & services that covers electronic goods, consumer durables, beauty products, groceries, books & stationaries, personal health, kitchen utensils, jewelleries, watches, garments, toys, sport goods, musical goods, baby products , entertainment and many more.

The types of costs that are involved in the production of Amazon's products/services are as follows:

1) Fixed Cost including manufacturing overheads - It includes set-up cost, cost of maintaining warehouse, cost of digitization, legal cost, cost of purchase of delivery vehicles, transportation vehicles, machines cost and lease costs, costs for scaling-up production and its managements.

2) Variable Cost including direct material & labor costs - Cost of daily workers, raw-material costs, procurement costs, cost of maintaining logistics, salaries & wages of delivery boy costs, pick-up costs, electricity cost, shipping costs, packaging costs, vendor management costs, cost of training employees

3) Marketing Cost - Cost of advertisements, cost of online and offline publications, Costs involved in sponsoring events

4) Operating Cost- Day-to-day costs for smooth running of business and includes rent and costs incurred in providing utilities services

5) Opportunity Cost - Costs of missed opportunities while deciding on undertaking a given opportunities

6) Sunk Cost - They are unavoidable and non-recoverable costs. Costs incurred from switching from one mode of production & maintaining logistics to another, generally observed when the company switches from manual work to digitization and innovations.

7) Controllable Cost - The costs that are in control of the expense managers. They includes office supplies, charitable & donations