Amazon Activity-Based Costing

Good Essays
II. Purpose
The purpose of this paper is to discuss Amazon’s retail principle goods and services operation and its activity based costing practices. Also the company’s standard cost operation will be analyzed, which will reveal how critical activity based costing and standard cost practices are to the business global operation.
III. Method
The Amazon company website was utilized to obtain qualitative and quantitative information along with online research from the Embry Riddle University’s information library database system to differentiate collected data and source of information.
Activity Based Costing (ABC)
I. ABC
Taking into consideration the long term interest of stakeholders; Amazon’s leadership focuses on a set of governance that emphasizes
…show more content…
The information from ABC costing guides a firm or company in making paramount decisions in which, non-value actives can be illuminated. One of Amazon’s identified cost activity that is controlled for maximum proficiency and savings is their customer service department. This department has both internal and external factors that must be constantly monitored and change when required. According to Keblis Chen (2006) Amazon maintain a just in need number of employees and make employment and training decisions at particular locations. To control cost they also decide whether to appropriate their call and e-mail volume to external affiliates (Keblis et al., 2016). These decisions reduce the cost of managing customer contacts while at the same time satisfying consumers. Take for instant the Customer Service Operation (CSO); Amazon internet online system allows customers to manage most of their inquiries on line via the website features and frequently ask questions section. Customers who have issue that goes beyond the online capability of the website can call the company’s customer service center and get their issues resolved. Amazon proficiently balances their customer service contact size by monitoring seasonal growth sales and activities which typically lowers during the summer months. These ABC methods allow Amazon to grow their revenues …show more content…
Factors Influencing Decision
According to Hilton and Platt (2014) many companies choose to relinquish traditional cost accounting perspective and practice a more active cost management angle (Hilton et al., 2014). When Amazon analyzes operating costs within each of their cost activities, it is much simpler to prognosticate the influence of all modifications to overall costs. The intricacies of ABC can pose some interpretation challenges nonetheless; it offers managers more pointed and precise information that can serve decision making favorably.
According to Pirrong (1993) variations of cost driver practices permit superior cost data for service firms liken to industrial firms. Activity based costing aid bookkeeping organizations in getting solution to well-known costs of performing services. Choosing the driving factors that estimate the core comportment of the cost to be allocated is the preferred method of assigning cost to merchandise (Pirrong, 1993). As previously mentioned Amazon.com balanced and adjust their customer service contact by applying the value associated with the department and online self-service and the overall effect was favorable to their bottom-line. Close monitoring of cost activities definitely benefits Amazon overall stakeholder

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