18.1 how much does a product cost?
TRANSCRIPT
18.1 HOW MUCH DOES A PRODUCT COST?
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
Why does Apple charge $539 for an iPad?
How did they get this amount?
18.1 HOW MUCH DOES A PRODUCT COST?
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
There are many reasons why Apple chose to price its iPad at $539:
Popularity of Apple brand
Estimate of how much customers are willing to pay
Desired profit or mark-up %
Price of products from competitors
How much it costs to make
18.1 HOW MUCH DOES A PRODUCT COST?
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
Example: assume the Apple factory in China incurs the following costs in making the iPad each month:
Cost of materials $200
Rent $3,000 per month
Packaging per unit $1
Cartage inwards per unit
$1
Customs duty per unit $3
Buying expenses $2,000
per month
Advertising $400 per month
So how much does each iPad cost for
Apple?
18.1 HOW MUCH DOES A PRODUCT COST?
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
Cost
Apple will need to work out which costs it can allocate to each unit of stock
Cartage inwards per unit
$1
18.1 HOW MUCH DOES A PRODUCT COST?
Cost of materials $200
Rent $3,000 per month
Packaging per unit $1
Advertising $400 per month
Cost of materials $200
Packaging per unit $1
Cartage inwards per unit
$1
Customs duty per unit $3
Buying expenses $2,000
per monthCustoms duty
per unit $3
Cost$205
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
Cartage inwards per unit
$1
18.1 HOW MUCH DOES A PRODUCT COST?
Cost of materials $200
Rent $3,000 per month
Packaging per unit $1
Advertising $400 per month
Buying expenses $2,000
per month
Customs duty per unit $3
Part of the Cost NOT part of the cost
Why are these part of the iPad’s
cost?
Why are these NOT part of the
iPad’s cost?
© Michael Allison, Trinity Grammar School.Author’s permission required for external use
TASK
In-class Homework
SQ1 X