Question
Amazon.com Inc. operates several fulfillment centers worldwide. The company wants to determine the cost of processing customer orders at its California fulfillment center. The annual
Amazon.com Inc. operates several fulfillment centers worldwide. The company wants to determine the cost of processing customer orders at its California fulfillment center. The annual cost of operating the center is $20,000,000. The center processes 2,000,000 orders annually. Calculate the cost per order using activity-based costing if the center incurs additional costs of $5,000,000 for order processing staff and $3,000,000 for warehouse space. Show how the cost per order changes when compared to traditional costing methods. Explain your calculations thoroughly.
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