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Fulfillment Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; credit card fees and bad debts costs, including costs associated with our guarantee for certain third-party transactions; and responding to inquiries from customers. Fulfillment costs also include amounts paid to third parties that assist us in fulfillment and customer service operations. Certain of our fulfillment-related costs that are incurred on behalf of other business, such as Toysrus, Inc. and Target Corporation, are classified as cost of sales rather than fulfillment. (a) What type of cost is Amazon’s cost of sales, a product or a period cost?

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Answer:

Cost of sales is a product cost since it is directly associated to the production of services by Amazon.

Explanation:

Another term for cost of sales is cost of goods sold. Even though Amazon provides services, it doesn't manufacture any goods, its cost of sales (or COGS) is directly related to the providing of the sales service.

Period costs are not directly associated to the production of goods or services, instead they are incurred as time passes, e.g. rent or interests.

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