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Apple Inc. Cost Evaluation Methods

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Problem Definition

Cost evaluation of high tech industries means that we have to consider all the methods and procedures applicable in the high tech industries to assess the cost and financial aspects. It is essential to view all the costs, expenses, and incomes in every sector, and each business that has using massive technology must be considering its financial terms at every step. So cost evaluation is an essential part of every industry. Every industry uses different methods according to its requirement and nature of working while having some similarities. Due to its diverse wildlife, industries use separate evaluations for their cost and finance transactions and effectively support its place.

Literature Review

Our discussion will present all the high tech industries and cost evaluation in detail by shoeing different assessment methods and procedures. Our panel shows how much cost evaluation is essential for industry, and its accurate calculation gives so much benefit to sectors. Every industry has a different production nature, and their different cost calculation must be measured with other techniques and procedures. In the smartphone market, Apple recorded the first quarter during 2015 and generated higher industry profits. The average cost of the iPhone product line was $603, but the trend dropped from $254 in 2014 to the minimum price during 2018 at $214. During 2011-2013, Apple’s tablet market was observed for steady growth (Kerr & Henry, 2015).

Introduction

Apple Inc. is a leading company due to cost competencies as a differentiation leader and increasing its cost.  Due to the increasing globalization of industry, the product lifetime is decreeing, and Apple is moving towards the retail world after increasing sales efficiency. Apple Inc. announced an installment plan and payment plan for the 24-month time frame. The company is keeping its customers in the Apple ecosystem. The cost evaluation of Apple includes analysis of manufacturing, distribution, marketing, and company skills. The general environment and industry analysis consider strategic issues, external research, demographic segment, economic segment, political and legal segment, and socio-cultural segment (Kerr & Henry, 2015).     

First of all, we have to know about high tech industries; high tech means that all those industries that use the most modern equipment and advanced technology and methods are known as the high tech industry. High-tech manufacturing companies are showing a significant role in the evolution of society and the world. High-tech companies and industries provide and adopt new technologies that explore more and more opportunities and go one step further to delivering original and advance solutions to every problem by using these technologies. In high-tech industries, three main changes must occur in the development journey like imbibe a global outlook, fast track research, and development, and capability building and manufacturing focus to create solutions. High-tech industries are moistly moving successfully facing five different challenges: poverty, healthcare, sustainability, education, safety, and convenience. (infosys.com, 20I8)

Now we talk about cost evaluation, cost evaluation used by every organization or industry that uses financial and other resources. In simple, cost evaluation is the method of measure how the resources are going to use in the industries. Different scales or measurement units can be used in various industries by helping from comparative studies of allocated resources in the organization network. In Boarder cost-benefit analysis, cost evaluation is considered a small part of checking in a better way to utilize resources efficiently. Cost evaluation of any type and different purposes is used in the industries as it may use for the organization’s division or a single project. The analysis is helpful in various aspects within the industry and helps the organization is in many ways. Unit values figuring out are essential for revenue comparison with individual units related to company division or any specific project. Profitability and efficiency are also measured with cost evaluation and consider the benefits of the company. (Blankinship, 2017)

Data Description:

Different types of evaluation will happen in high tech industries like cost allocation, cost-effectiveness analysis, and cost-benefit analysis. First is cost allocation; it is the most straightforward and simple method used to measure the profit. In other words, measuring the accounting system and budget, cost allocation is very much important. With this, the company can collect useful information related to outcomes, and clients belong to costs. So cost allocation is the most critical element in every business, and without this, any proper financing can occur in any industry. (Marczak). The percentage of the net profit market for Apple is provided below. The brand image of Apple is for premium products (Kerr & Henry, 2015).

Sales 233.7
Net profit margin 22.9 %
ROA 20.8 %
ROE 46.3 %
P/E (ntm) 13.0
Debt/Equity 56.4

 

 Second is a cost-benefit; typically, companies use this approach for helping in financial decisions, especially related to the field of purchasing. Cost benefits explain the new equipment s and their financial services related to specific software or tasks, help minimize the supply cost, increase business, and improve productivity.  Also include the essential worth of all related equipment, training costs, cost of changing supply and many other related expenses. This type of financial decision gives the company a better position related to its finance and proper cost allocation system without any error or flaw. The cost-benefit analysis can be explained in the following steps: brainstorm all the costs related to projects and make a detailed list of all that costs. Then consider the benefits associated with that cost on the project and industry also. The proper monetary value must be assigned to all prices, which means that appropriate physical resources must be calculated to measure the costs, include all human resources, and measure all the related estimates that help perform and complete the project more efficiently and effectively. All monetary values are related to the benefits of projects. It is more complicated as it is not easy to measure the benefits and its effect on the industry. Then we compare all the services with the costs and check how much the industry earns the profit at the end.

 The third one is cost-effectiveness. It is more complicated and involved than cost-benefit because it includes many different methods and elements in its analysis. This method works at the border level and provides a better decision as compared to other methods. It shows a profound change in the monetary values of every industry. So this method may deliver good performance at a higher level, and senior management takes empathetic and essential decisions related to industry and gives an economic level benefit while taking a better step for the company. (Zeiger, 20I8)

The market competition is based on the features and the price of the product, and Apple is becoming able to charge for the premium product as iPhone. The increase and fall in the prices and growth are improving in the world outside the globe. The low penetration of the product can be due to the low operating industry. The active income of Apple was recorded as 92% during 2015. The unit sales of products during 2016 increased to be 247.6 million. The CAGR for the iPad revenues during 2015-2020 is expected to be 5.94%, and the total company value is estimated at 11% (Kerr & Henry, 2015).

Market Apple Others
Smartphone market share 13.9% 45.7%
Tablet vendor market share 24.5% -17.9%
PC shipment market share 7.8% 16.1%

 

So every method is performing in the industry for making it more profitable and beneficial in the future. And these measurements are essential to check the profitability position of the enterprise.

Reference:
  • Blankinship, K. (2017, September 26). Definition of Cost Evaluation. Retrieved from https://bizfluent.com/info-7742610-definition-cost-evaluation.html
  • infosys.com. (20I8). High tech. Retrieved from https://www.infosys.com/consulting/verticals/Pages/high-tech.aspx
  • Kerr, J., & Henry, B. (2015, 11, 08). Apple Inc. (AAPL) Consumer Goods – Electronic Equipment. Retrieved from tippie.biz.uiowa.edu: http://tippie.biz.uiowa.edu/henry/reports15/AAPL_fa15.pdf
  • Marczak, M. S. (n.d.). USING COST ANALYSIS IN EVALUATION. Retrieved from https://cals.arizona.edu/sfcs/cyfernet/cyfar/Costben2.htm
  • Zeiger, S. (20I8). The Cost-Benefit Evaluation and Cost Effectiveness Evaluation Methods. Retrieved from https://smallbusiness.chron.com/cost-benefit-evaluation-cost-effectiveness-evaluation-methods-34485.html

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