Cost Allocation Analysis

Overview

Cost allocation analysis goes beyond simple revenue minus COGS to compute the fully-loaded cost of serving each order, product, and channel. Without proper cost allocation, high-revenue products may appear profitable while actually generating negative margin once fulfillment, marketing, and allocated overhead are factored in.

This skill guides you through allocating four cost buckets — COGS, variable fulfillment costs, direct marketing spend, and shared overhead — down to the product and order level using your existing platform tools, apps, and accounting integrations.

When to Use This Skill

• When the business needs to identify which products, SKUs, or channels are genuinely profitable after all costs
• When building a P&L view that goes below gross margin to contribution margin and net margin
• When evaluating channel economics — understanding that marketplace orders carry marketplace fees on top of COGS
• When product managers need to make pricing decisions backed by fully-loaded cost data
• When finance is building monthly management accounts and needs automated cost allocation
• When the business is scaling and shared overhead is growing faster than revenue

Core Instructions