Cost calculation and apportionment are the top priorities of Amazon’s financial accounting. Only by accurately calculating costs can profits be accurately calculated, and companies can clearly understand the input and output of funds. Decision-making requires the support of cost data. So, let’s learn about how Amazon calculates the cost of product selection!
1. First-in, first-out method.
The goods that are put into storage first will be shipped first. In terms of cost pricing, the cost of the first batch of goods is priced according to the cost of the first batch of goods put into storage.
Advantages: Highly compatible with Amazon delivery principles, suitable for sellers operating on the Amazon platform, suitable for categories with large price fluctuations and high shelf life requirements such as grain, oil and non-staple food, flexible pricing, and low-cost delivery of goods. Settlement at any time supports the calculation of the cost and profit of each batch of goods to meet the needs of enterprises.
Disadvantages: The workload is extremely cumbersome, especially for companies with frequent inventory movement.
2. Moving weighted average method.
It means recalculating costs based on the incoming and outgoing quantities of each incoming and outgoing warehouse. Most Amazon sellers use the moving weighted average method to calculate costs. The basic calculation formula is: latest unit cost = (last balance inventory amount + current change inventory amount) / (last settlement inventory quantity + local change inventory quantity).
Advantages: It is suitable for companies with small product price fluctuations such as trading companies. The calculated unit cost and delivery cost are more objective, which can help managers understand inventory balances in a timely manner.
Disadvantages: Every time a new batch of goods is imported, the price of a single product must be recalculated, which requires a heavy workload in financial accounting.
3. Month-end one-time weighted average method.
It refers to the total purchase cost of the month plus the inventory cost at the beginning of the month, divided by the total purchase quantity of the month plus the inventory quantity at the beginning of the month, to calculate the cost of each item in the month. stock. Very few Amazon sellers will choose this method to calculate costs. The basic calculation formula is as follows: Single product cost this month = (Purchase warehousing amount this month + Transfer warehousing amount + Purchase return warehousing amount + Other warehousing amounts + Amount at the beginning of this month)/(Purchased warehousing quantity this month + Transfer warehousing quantity + Other warehousing quantity + Purchase return quantity + Beginning inventory quantity this month).
Advantages: The calculation method is relatively simple and suitable for enterprises that do not have high requirements for cost accounting accuracy.
Disadvantages: Nowadays, prices fluctuate greatly. Using this method to calculate costs makes it impossible to check the inventory delivery volume and balance from the books.
The above introduction is the knowledge sharing on how to calculate the cost of Amazon product selection. Amazon has always been at the forefront of foreign trade. Anyone who has done operations knows that Amazon is on the battlefield of product competition. It is the so-called “seven products”. “Divided into products, divided into three parts for operations”, only by doing cost accounting in the early stage of product selection can we ensure the maximum sales profit, and later cargo damage will not have a big impact on profits.