Microeconomics Milestone 3 Help - Netflix is company being researched

Supply and Demand

Getting Started: Costs of Production
Confused on how to get started writing the section on Supply and Demand? No problem…get started following the steps below!
Step 1:
Track down the last 5 years of your firm's Income Statements (available in the Annual Reports).
	*Note that the annual reports should be available on your firm's website, usually on the Investor Relations Page.
Step 2:
Enter the annual COGS (cost of goods sold) or Cost of Revenue data for the last 5 years into the box further down in this spreadsheet.
	*Do not use quarterly data (most industries have a time of year that is better than others and it makes the overall trend more difficult to see)
	*The COGS data generally shows the variable costs of production (costs that vary with changes in output)
	Remember, when we talk about variable costs, they aren't variable costs because the price of one of the inputs to make the product changes from month to month
	(especially raw materials such as oil, steel, etc.), they are variable costs because the cost will increase as your firm produces more goods or services, and will decrease
	if your firm produces less. Yes, inputs can increase or decrease and have an impact on profitability (you'll need to discuss that too!), but that isn't what defines the cost
	as "variable" in microeconomic terms
Step 3:
Enter the annual Operating Expenses data for the last 5 years into the box further down in this spreadsheet.
	*Again, make sure to use annual rather than quarterly data
	*The operational expenses generally show the fixed costs that your firm faces
	Remember, when we talk about fixed costs we are talking about costs that will stay the same whether your firm produces more or less goods or services.
Step 4:
Enter the annual profitability data for the last 5 years into the box further down in this spreadsheet.
	*Make sure you are using the annual Net Income data
Enter data from steps 2 through 4 here:
	*Note that you must fill in the yellow boxes with the information from your firm in order to create your graph
Your Firm's Name:		Netflix, Inc.
Enter the Time Period Studied:			2012	*This is where you will enter the earliest year in the time period being analyzed (for example: 2011)
			2013
			2014
			2015
			2016	*This is where you will enter the most recent year of data in the time period being analyzed (for example: 2015)
Enter the COGS or Cost of Revenue for the appropriate year
			COGS (in millions)	*Create the appropriate label for your chart
		2012	$2,652,058.00	*Enter the COGS for the earliest time period being studied and make sure to get your scaling correctly (doesn't have to be in millions)
		2013	$3,117,203.00
		2014	$3,752,760.00
		2015	$4,591,476.00
		2016	$6,029,901.00	*Enter the COGS for the most recent time period being studied
Enter the Operating Expenses for the appropriate year
			Operating Expenses (in thousands)	*Create the appropriate label for your chart
		2012	$907,232.00	*Enter the cost data for the earliest time period being studied and make sure to get your scaling correctly (doesn't have to be in millions)
		2013	$1,029,012.00
		2014	$1,349,248.00
		2015	$1,882,209.00
		2016	$2,420,975.00	*Enter the cost data for the most recent time period being studied
Enter the Net Income Data for the appropriate year
			Net Income (in thousands)
		2012	$17,152.00
		2013	$112,403.00
		2014	$266,799.00
		2015	$122,641.00
		2016	$186,678.00
Step 5:
Take a look at the graph you created for your firm!
	*Note that the axis on the left shows the values for COGS + Operating Expenses and the axis on the right shows the values for Net Income
	Given the complexity of the chart, you should also show a summary table of the data (one is provided to the right)
	Netflix, Inc.						Netflix, Inc.
							YEAR	COGS (in millions)	Operating Expenses (in thousands)	Net Income (in thousands)
							2012	$2,652,058.00	$907,232.00	$17,152.00
							2013	$3,117,203.00	$1,029,012.00	$112,403.00
							2014	$3,752,760.00	$1,349,248.00	$266,799.00
							2015	$4,591,476.00	$1,882,209.00	$122,641.00
							2016	$6,029,901.00	$2,420,975.00	$186,678.00
Step6:
Analyze your chart.
	*What is the trend in COGS (the blue bar)? Is it increasing or decreasing?
	Why are COGS increasing or decreasing? Check press releases, financial websites, etc for information on the cost of producing your firm's product.
	Remember, this is where you'll find out what is going on with variable costs.
	*What is the trend in Operating Expenses? Is it increasing or decreasing? Usually these costs will be fairly stable.
	If there is a major change in operating costs over a year or two, be sure to find out why!
	Again, press releases, financial websites are great sources. Is your firm investing in research and development or advertising?
	Remember, this is where you'll find out what is going on with fixed costs for your firm.
	*Discuss how the production costs are impacting profitability
	This is where you'll look at the whole picture. In this example, yes, COGS increase dramatically in year 4, but so does profitability.
	Any jumps in trends like this should be explained in your paper; perhaps there was a merger or a new product line added that generated a lot more revenue as well.

COGS (in millions) 2012 2013 2014 2015 2016 2652058 3117203 3752760 4591476 6029901 Operating Expenses (in thousands) 2012 2013 2014 2015 2016 907232 1029012 1349248 1882209 2420975 Net Income (in thousands) 17152 112403 266799 122641 186678

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