Introduction: -
A company can sale more than one product and each product can be similar to the other product based on its characteristics and use. A collection of products having the same characteristics constitutes the product line and a collection of product line is called the product mix. For example ‘Google’ sells phones, software, etc… Each constitutes a different product line.
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- The amount of revenue from each of its product lines for the years ended September 28, 2013, September 29, 2012 and September 24, 2011.
- If Apple wishes to evaluate each of its product lines, how can it allocate its operating expenses to each of them to determine each product line’s profitability?
- Access Apple’s annual report for a fiscal year ending after September 28, 2013, from its website (Apple.com) or the SEC’s EDGAR database (www.SEC.gov). Locate its table of “Net Sales by Product” in the footnotes. How has its product mix changed from 2013?

Answer to Problem 1BTN
Solution: -
1.
Total Revenue (in Millions) | Year Ending | iPhone | iPad and iPod | Mac | iTunes, Software and Services, and Accessories |
| | 53% | 21% | 13% | 13% |
170910 | Sep-13 | 90582.30 | 35891.10 | 22218.30 | 22218.30 |
156508 | Sep-12 | 82949.24 | 32866.68 | 20346.04 | 20346.04 |
108249 | Sep-11 | 57371.97 | 22732.29 | 14072.37 | 14072.37 |
2. The operating expenses can be allocated on the basis of sales contribution of each product line divided by the total sales during the year.
3.
Year | iPhone | iPad and iPod | Mac | iTunes, Software and Services, and Accessories |
Sep-13 | 53% | 21% | 13% | 13% |
Sep-14 | 56% | 17% | 13% | 14% |
Explanation of Solution
-
- Amount of revenue of each product line
Total Revenue (in Millions) Year Ending iPhone iPad and iPod Mac iTunes, Software and Services, and Accessories 53% 21% 13% 13% 170910 Sep-13 90582.30 35891.10 22218.30 22218.30 156508 Sep-12 82949.24 32866.68 20346.04 20346.04 108249 Sep-11 57371.97 22732.29 14072.37 14072.37 Total Revenue (in Millions) Year Ending iPhone iPad and iPod Mac iTunes, Software and Services, and Accessories 53% 21% 13% 13% 170910 Sep-13 =A3*C2 =D2*A3 =E2*A3 =F2*A3 156508 Sep-12 =A4*C2 =D2*A4 =E2*A4 =F2*A4 108249 Sep-11 =A5*C2 =D2*A5 =E2*A5 =F2*A5 Note: The revenue from the product line is calculated by multiplying ‘Product Revenue Mix Percentage’ to its Total Revenue.
The operating expenses can be allocated on the basis of sales contribution of each product line divided by the total sales during the year.
- Details of change in the product mix is as follows:
Year iPhone iPad and iPod Mac iTunes, Software and Services, and Accessories Sep-13 53% 21% 13% 13% Sep-14 56% 17% 13% 14%
Conclusion: -
There is an increase in contribution of iPhone, Software and Services in total sales of Apple Inc.
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Chapter 24 Solutions
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