According to the GottaBe Mobile website in September 2013, the Apple iPhone 5S with 16 GB memory sells off-contract for $649, while the iPhone 5C with 16 GB memory sells off-contract for $549. The same phones with 32 GB memory sell off-contract for $749 and $649.
According to Bloomberg Businessweek and IHS iSuppli, the iPhone 5S model with 16 GB memory costs $199 to produce. IHS iSuppli also reports that the 5C model of the iPhone (also with 16 GB of memory) costs $166 to produce. An extra 16 GB of memory for each phone (to bring it to a total of 32 GB memory) costs Apple about $0.71 per GB.
Questions
1. Calculate the gross margin (or profit) in dollars for each of the following phone models/configurations:
- iPhone 5S with 16 GB memory
- iPhone 5S with 32 GB memory
- iPhone 5C with 16 GB memory
- iPhone 5C with 32 GB memory
2. Calculate the gross margin in percentage (gross margin in dollars / sales) for each of the following phone models/configurations:
- iPhone 5S with 16 GB memory
- iPhone 5S with 32 GB memory
- iPhone 5C with 16 GB memory
- iPhone 5C with 32 GB memory
3. Which phone model is most profitable for Apple?
4. Apple has made a conscious decision to not make its phones’ memory cards swappable (i.e., the phone owner cannot purchase a larger memory card at a later date to give the phone more memory). The consumer must upgrade to an entire new phone if additional memory is needed at a later date. Why do you think Apple has made this choice? Do you think Apple’s decision is ethical and sustainable? Provide your rationale for your answer.