Chapter 24, Problem 1BTN

To determine

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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1. The amount of revenue from each of its product lines for the years ended September 28, 2013, September 29, 2012 and September 24, 2011.
2. 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?
3. 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

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1. 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.

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. 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

Conclusion: -

There is an increase in contribution of iPhone, Software and Services in total sales of Apple Inc.