Iphone 5C price decision

Topics: Variable cost, Costs, Marginal cost Pages: 4 (1332 words) Published: October 13, 2013
The fist factor that important in the pricing decision of iPhone 5C is by considering costs. For instance, since Apple Inc. wants to maximize its profits through establishing new products, the price should be set at the point where marginal revenue equals to marginal cost. We know that iPhone 5C is in the perfectly competitive market, the company can reach its maximum profit at equilibrium at X* and P*. To determine the price, Apple Inc. needs to do the marginal analysis. According to profits (π) equals to total revenues (TR) minus total costs (TC), which is π=(P*X)-(fixed cost+variable costs per unit *X), X is the number of units sold by Apple Inc. Of course, manager needs to ask several departments and contractors to know the cost of their product and services. From online websites, I get to know that producing a 16Gbyte iPhone, total BOM and Manufacturing Cost is about $173.45, for a 32Gbyte iPhone 5C is approximately $182.85(which accounts only for hardware and manufacturing costs and does not include other expenses such as software, licensing, royalties or other expenditure)(Andrew, 2013). The manager can differentiating the fixed costs and variable costs based on cost behavior, and plug those numbers into the equation and get an equation between π and X. then differentiate the equation and set it to zero, the manager can get the number of units when profit maximizing. Finally, plug X into assuming demand function, the manager can get the price and make a decision. But, in the real world, it is not easy to implement the marginal analysis method. So, managers usually try to combine cost-based approaches and market-based approach to make a profit satisfying approach, for example full cost-plus target profits, variable costs-plus percentage markup can both assess to pricing decision. However, the common and basic factor for the methods is costs. The second factor that important in the pricing decision of iPhone 5C is product line and competitors. Strategy...
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