If I have a delivery business that costs $100,000 per year to operate and I deliver 10,000 packages, then the average cost is $10 per package. But if 80% of my cost is from operating a building and buying delivery vehicles and 20% of the cost is from paying staff and fueling the vehicles for delivery, then I can still make money by delivering a bunch of packages for $5. That’s because the cost of the building and buying the vehicles is a FIXED cost that I have already paid regardless of how many packages I deliver.
1) you assume that the Amazon rates are sufficient to cover variable costs,
2) long term, the Postal service’s fixed plant should be sized to handle profitable business, not business which can only be generated at a loss.
The USPS is losing money and want an emergency bailout.
I would agree that absorption of overhead costs can be of real benefit, but there is also a limit to that. In other words, what about the increased labor costs, maintenance costs,, etc. the problem with chasing volume at the expense of good costing is that it is often a recipe for failure should something become out of whack.