15. [Cost of sales and treatment of fulfillment costs; pro form operating results] Amazon.com [AMZN] sells books, videos music, and many other products online For the years ended De EXHIBIT 2P-2. AT&T Revenues and Operating Income 1991-2000 (in Smillions) Total Operating Special Year Revenue Income (loss) Charges* 1991 $41,842 $2,681 $(3,500) 1992 42.960 6,246 1993 43,780 6,577 1994 46.000 7.409 1995 48,455 5.184 (3,000) 1996 50,546 8,763 1997 51,319 6.968 1998 53,223 7.487 (2,514) 1999 62,600 10,859 11,506) 2000 65.981 4,277 17.029) *Restructuring and other charges, pretax.

cember 31, 1997 to 2000, Amazon reported the following data ($ millions) 1997 1998 1999 2000 Net sales $148 $610 $1,640 $2,762 Cost of sales 119 476 1,349 2,106 Gross margin 19.5% 21.9% 17.7% 23.7% Fulfillment costs $12 S65 $237 $415 In the footnotes to its financial statements, Amazon defines ful- fillment costs as "costs of operating and staffing distribution and customer service centers, including costs attributable to receiv- ing, inspecting, and warehousing inventories; picking, packaging and preparing customers' orders for shipment; credit card fees; and responding to inquiries from customers."

a. Evaluate Amazon's policy of excluding fulfillment costs from cost of sales.

b. Without prejudice to your response to part

a, recalculate Amazon's gross margin percentage including fulfillment costs in cost of sales.