Question

1. Cost and Pricing - Many businesses are offering their products and services over the Internet. Find well known company and, determine the following:
   1. A product (or service) description
   2. A product price
   3. Based on your responses to parts (1) and (2), along with the description of the company's business, identify the potential costs that are required to provide the product selected in part (1) and categorize them as fixed or variable.
   4. Which product do you believe has the largest contribution margin per incremental unit sold?
   5. Describe at least two types of standard costs your selected company might use. Additionally, explain the types of direct and overhead variances each of your selected organizations might encounter. Provide an example of each.

New answer, please.

Answer 1

the company I selected is amazon and the product is amazon echo.

Amazon is a website which focuses on selling product through internet.the company is involved in the e-commerce sector. the company also manufactures its own product under its brand name. and amazon echo is a product that is manufactured and owned by Amazon.

amazon echo is a smart speaker developed by the amazon with the help of artificial intelligence.it is also available in different languages and very effective virtual assistant. the main competitor of amazon echo is google home. which is manufactured by google.lets look at some of the costs involved in the business.

fixed

• domain charges
• employee costs
• server hosting charges
• renting, water, internet,energy etc

variable

• wages
• marketing /advertising
• freelance cost
• administration cost

there are many models that come under amazon echo. the product comes at a different price level. amazon echo 3rd gen is having the largest contribution margin per incremental unit sold.

variance-variance is the difference between standard and actual.it helps the management to find deviation and take necessary steps.

direct material variance: the organization will definitely encounter this variance. the difference between standard cost and the actual cost is the direct material variance. the direct material variance gives the idea of direct material used, and any deviation is infected by the management.

example:

material cost variance=standard cost-actual cost

standard material cost=2kg of raw material at 30 per kg=60 per unit

let's assume,50 units is manufactured with 110 kg of material at a cost of 3630

so, direct material cost variance = 110*30=3300(standard cost)

(actual cost)3630

variance=3300-3630

=330(a)

overhead cost variance:

overhead cost variance is one of the other variances that will be there when manufacturing the amazon echo.

the variable overhead variance-variable expense comes under this expense.for example, advertising.

example: lets say advertisement expense expense per unit is incured 3 per unit and only 200 quantity is sold out of 400.then the variance will be =600