Doc 2

According to BGR (2011), “A recent teardown of Amazon’s new Kindle Fire tablet reveals that the company is likely selling its new Android-powered slate at a loss. The total cost to manufacture the product was $201.70. Further breakdown of the total is as followed: display and touchscreen $87.00, Main PCB 64.45, battery $16.50, enclosure $14.40, box contents $3.25 for a subtotal of $185.60. After manufacturing services expenses are added to the cost of production the total cost is $209.63. Amazon first retailed the product for $199 for a $10.63 loss per tablet sold. According to eWeek (2011) "The real benefit of the Kindle Fire to Amazon will not be in selling hardware or digital content, rather, the Kindle Fire, and the content demand it stimulates, will serve to promote sales of the kinds of physical goods that comprise the majority of Amazon's business."

The initial point for deciding a product’s price is to first determine how much it will cost to get the product out to the consumers. The price consumers purchase the product for must be more than the cost of producing or delivering a product or the company could lose money. When determining the cost of a product, the marketer will examine all costs that are needed to get the product to market.
Variable costs are the costs that fluctuate with number of units produced. At a certain point on the production curve it becomes costly to continue production, and so Amazon must find the point they are most profitable when marginal costs equal marginal revenue. Factors that affect this measurement are cost of labor as related to the government standards, cost of supplies for production, and the possibility of Amazon finding cheaper goods that have the same quality of more expensive components. Labor costs vary by country and standard of living in that country. This affects variable cost in that the company may wish to produce in a country with low labor costs and with high supply of labor....