Managerial Accounting Due Tomorrow

Apple Inc. has disclosed the cost under the category of cost of revenue, research and development cost, sales, general and Admin cost, interest expenses and tax expenses. So the following are the cost that may come from these cost categories (Terrel, E., 2008).

· Cost of Revenue:

It includes the cost incurred to get the sales revenue plus the cost of goods sold.

1. Direct Material Cost

It includes the cost of components such as batteries, cameras, chips and others to produce the iPhone. It is the variable cost that vary with the number of iPhone produced. Apple Inc. purchased these item from all around the globe. Cost driver of direct material cost is number iPhone produced during a particular period.

2. Direct Labor Cost

It is cost that incurred in the shape of wages to produce the goods such as iPhone. Apple Inc. has outsourced its entire manufacturing process and rely on the developing countries such as China, Taiwan and other Asian countries to get the benefit of cheap labor. Apple Inc. paid these direct labor cost to its manufacturing suppliers such as Foxconn which is Taiwan company to assemble its iPhones and other products. Cost driver is number of direct labor hours (Cuenca, S., 2016).

3. Factory Overhead Cost (FOH)

Electricity cost, depreciation of plant and equipment, rent of factory and building and many others come under this category. Manufacturing overhead is the mixed cost for Apple Inc. because it has the characteristics of both fixed and variable cost.

· Research and Development

Apple Inc. continuously spending its huge budget on the research and development in each year. Last year Apple Inc. spends $11.581 Billion on the research and development. Following are the possible Research and development expenditure of Apple Inc (Levy, S., 2018).

4. Market Research

It is the part of Research and development under this head Apple Inc. forecast the upcoming future technologies and collects the market data where its future products can be sold.

5. Software development cost

Apple Inc. has its own software known as IOS which is used in the iPhone. Apple Inc. continuously updating its software and makes the best possible changes in each year.

6. Warranty cost

It is cost that the Apple Inc. incurred in each year to repair and replace its products that has been sold to its customer and become faulty under warrant years. It is fixed cost and adjusted at the end of period

7. Licensing Cost

Though this cost Apple Inc. buys the license for the technologies that will be used in the upcoming products of Apple Inc. and also pays royalty for using the technologies in its products. It is also the fixed cost

· Sales, General and Admin Expenses:

Apple Inc. has spent the $ 15.261 billion in 2018. Following expenses comes under this head

8. Selling Expenses

Amount of commission paid by the Apple Inc. to its suppliers for selling its products to the final customers. Advertising expenses also comes under this head. It is variable cost and changing with the number of products sold

9. Salaries Expenses

Cost paid the Apple Inc. to its employees on the basis of monthly salaries for providing the services to Apple Inc. is come under this head. It is fixed cost for Apple Inc.

10. Investment Cost

Apple Inc. pays the investment cost in the shape of interest expenses in each year for getting the resources from its supplier (Levy, S., 2018).

Manufacturing Overhead at Apple Inc.

All the cost other than direct material and direct labour incurred in the manufacturing process of iPhone is considered as FOH. Supervisor salaries, electricity cost, depreciation of plant and equipment, rent of factory and building, cost of supplies used and many others come under this category. Manufacturing overhead is the mixed cost for Apple Inc. because it has the characteristics of both fixed and variable cost. Apple Inc. paid these cost to its manufacturing partners in the shape of service charges. Number of Machine hours is the cost driver for the Manufacturing overhead. Another important factor is that Apple Inc. has longer the product life cycle of its key products which also facilitate the Apple Inc. to get its finished goods on lower prices from key suppliers for reducing the per unit cost of products.

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