Levi’s, Burger, iPhone
One hell of a profit margin?
The simple answer is YES.
If you want to calculate the profit margin for an iPhone you have to be a professional and even then, if you aren’t working for Apple in this business area, you’re faced with a lack in lots of relevant details.
What do you need for expense budgeting?
• Apple’s SEC filings
• Leaked manufacturing costs
• Leaked prime costs of components
Most of the two latter data have to be retrieved from Chinese companies. That’s not only difficult to read for us but also to understand what’s included and why it could be reliable information. If you ever lived in an Asian country like me you know that “Think different” applies to businesses.
So you only can calculate an estimated profit per device. These factors (and some more) have to be taken into account:
- Licensing fees
- Production costs
- Manufacturing costs
- Operating expenses
- Wholesale to retail markup
- Research & Development costs
- Selling, general, administrative costs
#8 is a really heavy calculation and can’t even exactly be done by Apple’s employees. It includes everything from paying the electric bill, shipping and storage, additional costs along the supply chain, Tim Cook’s salary and that of all others, and, and, and.
After doing the math …
Roughly half, or more, of every iPhone sale is profit.
The numbers which lead to this result aren’t air tight. Apple makes far more profit than any other phone manufacturer, but 50 percent isn’t unheard-of for a highly successful company which also brings a lot of jobs directly and indirectly bound to the product.
The Gross Profit Margin (= (Sales – Cost of Goods Sold)/Sales) tells us the profit a company makes on its cost of sales, or cost of goods sold. In other words, it indicates how efficiently management uses labor and supplies in the production process.
Here are the GPMs of some companies playing in the same league as Apple:
- Nike 43 %
- Porsche 50 % (btw the only automaker)
- Levi’s Jeans 52 %
- Burger King 56 %
- McDonald’s 40 %
Tesla, the company of Elon Musk (known for his failure to file for insolvency in due time) makes 17 % and is within the a range of 10-20 % typical for US industries (Source Sageworks).
We’re overpaying for more than just iPhones these days.
So if you complain about Apple
be consequent and stop eating burgers.
Oh, I forgot. That caps it all. Wireless carriers make as much as 10,000 % profit with the rates they charge for SMS plans.
Enjoy your burger
while texting with your iPhone
via your provider’s cellular equipment.
Take care when riding your Porsche back home.
Thanks for visiting iNotes4You.