Company researched, Apple Inc.
Apple Inc. is a multinational company that deals with manufacture and distribution of consumer electronics, both hardware and software products. The hardware products personal computers, iPod music player, iPhone smartphone, andiPad tablet computer, while the software products include the OS X and the IOS operating systems, the iTunes media browser and the safari web browser. Apple Inc. was incorporated as Apple computer Inc. on January 3 1977. However the word computer was removed from its name on January 9 2007, on the eve of that day Steve Jobs introduced the iPhone reflecting its focus in consumer electronics. Current statistics indicate that Apple Inc. is the second largest information technology company by sales.It’s also the third largest mobile maker after Samsung and Nokia.
The hardware products were developed in different times and contain different operating systems with different features to suit their customers. Having a glance at some of them, we can distinguish the specialities.
The iPhone is a smartphone developed to use the Apple’s IOS mobile operating system. The first generation iPhone hit the market on June 29 2007. Since then, through their intensive research the company has designed the latest generation, the iPhone 5c and iPhone 5s which were introduced in September 10 2013. The user interface is built around the devices touch screen including a virtual keyboard. The iPhone has Wi-Fi and a cellular connectivity (2G, 3G, 4G and LTE). The iPhone can perform several functions like shooting video, taking photos, playing music, send and receiving email, browsing the web, sending and receivingvisual voicemail. Other functions are video games, reference works, GPS navigation, social networking enabled by downloading application programs. There are seven generations of iPhone models; first generation, iPhone 3G, iPhone 3GS, iPhone 4, iPhone 4S, iPhone 5, iPhone 5S and iPhone 5C.
The iPad is a tablet computer and developed under the IOS operating system. The first generation was produced on April 3rd2010. The most recent models are the iPad Air and the iPad mini which hit the market on November 12th 2013. The user interface is built around the device’s touch screen including a virtual keyboard. The iPad has a built in Wi-Fi and some models have a cellular connectivity. An iPad can perform several functions like shooting video, taking photos, playing music and perform internet functions such as web browsing and emailing. Other functions include games, references, GPS navigation, social networking enabled by downloading and installing the applications. There are five versions of the iPad: first generation, iPad 2, third generation, fourth generation and iPad Air.
The iPod is a line of portable media players developed and distributed by the Apple Inc. The first line was produced on October 23rd2001. IPods can serve as data storage devices, with a capacity varying from 2GB for the iPod shuttle to 160GB for the iPod classic. The devices are managed by the Samsung ARM and the Apple A5 CPUs. The name iPod was suggested by Vinnie Chieco, a freelance copy writer. The earliest recorded use of an iPod trademark was in 1991 by Chrysalis Corporation of Sturgis, Michigan, styled “iPod”. The latest versions of the iPod are the ultra-compact iPod shuttle, the compact iPod Nano, the touch screen iPod touch and the hard drive based iPod classic.
The mac is a graphical user interface developed on the mac operating system by the company for their Macintosh line of computer systems. Mac operating systems have existed in two major series, up to major revision 9, from 1984 to 2000, it was historically known as classic mac OS. Major revision 10 from 2001 to present has had the brand name of the mac OS X and now OS X. this operating system has appeared to be more user friendly compared to then the current ones such as the MS dos while more technically challenging to operate.
Effects of changes on the variable/fixed cost structure of the company on cost volume analysis
Variable cost, variable cost per unit remains constant no matter how many units are made in the relevant range of production. Total variable cost increases as the number of units increase, examples include production material and labour. If no units are made, neither cost is necessary or incurred. However each unit produced requires production material and labour.
Fixed cost, total fixed costs remain constant as the volume varies in the relevant range of production. Fixed cost per unit decreases as the cost is spread over an increasing number of units, examples include: fire insurance, depreciation, factory rent and property taxes.
Fixed costs and variable costs help the managers to know the break-even point. At the break-even point the total revenue should be equal to the total costs, the fixed costs plus the variable costs. Since the fixed costs are constant and are incurred regardless whether production takes place or not, variable costs are considered relevant in decision making by managers. To break even the company must produce a certain number of units to cover the total costs incurred in that period. Variable costs increases as the level of activity increases. This implies that the higher the number of units produced the greater the variable costs incurred. A significant increase in the variable costs will increase the number the units of units produced within the relevant range. Fixed cost will remain constant and as the number of units produced increase the fixed cost per unit will decrease. This implies that an increase in the total variable leads to a decrease in the fixed cost per unit.
These costs help in the pricing mechanism to know the amount to be charged per unit produced. The managers consider the costs incurred in order to price the unit. A higher cost implies that the products will be expensive. While a lower price depicts cheaper products in market.
The current cost system of Apple Inc.
The company uses the activity based costing system. Activity based costing system can be thought of as a method of charging overheads to cost units on the basis of the benefits received from the particular indirect activity, example ordering, inspection, planning
Steps in ABC
Step 1 identifythe activity
Activities are composed of the aggregation of units of work or tasks and are described by verbs associated with the tasks. The main activities in an organization include: materials handling, purchasing, reception, dispatch, machining and assembly.
Step 2 selecting the appropriate cost drivers
Some good characteristics of an activity include: It should provide good explanation of costs in each activity pool and should be easily measurable; data should be relatively easy to obtain and identifiable with products.
Step 3 applications of cost driver rates
Benefits of activity based costing system over traditional system
Traditional method as known as conventional method is a method of allocating overheads based on the overhead absorption rate (OAR) reflected in the activity level. The benefits of activity based costing include;
A comparison of sales forecast with the actual sales and strategies to improve the sale performance
A clear indication from the current statistics shows that the budget for the Apple Inc. products is underperforming. The company has adopted several mechanisms in order to boost the sales revenue.
Products like the smartphone are expensive. The company should consider lowering the price of the products in order to attract more customers. This is aimed at increasing the sales.
Conducting market research, the company should carry out a major research in order to know the needs of their customers. After which the company should design other products according to the needs of their clients.
Entering into new markets and conducting a market survey. Introducing the products into new markets and conducting major advertising campaigns to inform new customers of their products. This will help in broadening the market share.
Training employees, the company should focus on offering training facilities on new development skills in order to design new products. Training also motivates the employees. The company should consider incorporating the employees in decision making. It is important to view their customers as only customers but also their stakeholders.
Engaging in new product design to curb the rapid technological advances in order to outdo their competitors in the markets. The company should invest in the new technology by developing and designing new products.
References;
Horngren, CT (2001) Cost accounting (1st) New Delhi India prentice
Drury C. (2000) Management and Cost accounting (5th) London (UK) ELST
Lucey T. (1993) First course in Cost and Management accounting (2nd) London (UK) DPL publications
Brown G, (1991) Management and Cost accounting (2nd) London (UK) Longman publishers
