Traditional Format 2016 2017 2018

Net sales $135,987 $177,866 $232,887

Operating expenses

Cost of sales 88,265 111,934 139,156

Fulfillment 17,619 25,249 34,027

Marketing 7,233 10,069 13,814

Technology and content 16,085 22,620 28,837

General and administrative 2,432 3,674 4,336

Other 167 214 296

Total operating expenses 131,801 173,760 220,466

Operating Income $4,186 $4,106 $12,421

1. . Is Amazon.com's cost of sales a fixed or a variable cost? Is the cost of technology primarily a fixed cost or a variable cost? Explain.
2. Amazon's fulfillment expenses include fixed costs of their fulfillment centers plus (largely variable) costs to buy, receive, and store inventory, to pick, pack, and ship orders, and to process customers' payments. Assume that Amazon's fulfillment expenses are 80% variable and 20% fixed. Amazon's annual report indicates that marketing expenses are largely variable, and general and administrative expenses are largely fixed. Assume that technology and content expenses are 50% variable and 50% fixed. Using the attached worksheet (see below), convert Amazon's traditional format income statement to the contribution format for the three years ended 2015, 2016, and 2017. Discuss the trend in the contribution margin (dollars), and likely reasons for this trend.
3. What is the trend in the contribution margin ratio, and what are likely reasons for the changes in this ratio? W
4. What is the breakeven point for operations,measured in sales dollars, for each of the last three years?
5. How has Amazon's stock price changed from 2016 to 2018?