Apple Process Costing System Worksheet

INDIVIDUAL PROJECT (BA252) Project Guidelines The individual project is due by April 16. 2021, so you must submit a copy of your write-ups by then. Individual Project_Course section&semester_Name  File name format : Individual Project_Course section&semester_Name.doxc  Report format: The finished product must be typed.  Required: Times New Roman, 12 point, double spacing, left alignment, first line of each paragraph half-inch indentation. i. The title page: your name, your course section & semester ii. The Body: 1. Answer all questions. 2. Include formulas and numbers used in calculations. 3. Clearly deliver your opinion.å No handwritten reports will be graded. Use a Microsoft word. 1. (10 points) A research firm, IHS, did a teardown of the iPhone Xs shortly after Apple released the model in late 2018. IHS estimated that the costs of the components in the 64-gigabyte (GB) model of the iPhone Xs add up to $390.00. See data table that follows. Questions ⚫ Do you think that Apple uses a process costing system or a job costing system? Give reasons for your answer. ⚫ Assume that Apple assigns a cost of $10 to the iPhone Xs for “manufacturing cost.” What specific costs do you think would be included in that “manufacturing cost”? ⚫ In accounting terminology, what would the costs included in the Bill of Materials (BOM) be when discussing product cost?

Assume that Apple assigns a cost of $10 for “manufacturing cost.” What would be the estimated gross profit per phone? What types of costs other than the costs estimated in this activity would gross profit have to go toward covering? ⚫ The BOM costs for the units sold would appear on Apple’s income statement. In which income statement component would these BOM costs appear? ⚫ Apple could start manufacturing some products in the United States rather than in China. If the iPhone Xs were to be manufactured in the United States, which cost components would you expect to increase? Which cost components might you expect to decrease? What other factors would Apple consider when deciding where to manufacture its products? 2. (10 points) The U.S. government estimated that Air Force One costs the taxpayers $179,750 per hour. Air Force One is a custom-built Boeing 747 for the president’s use while in office. (There are technically a few planes that are used as Air Force One; whichever one the president is on is called “Air Force One.”) While the president is in office, the president is required by law to use Air Force One for all air travel.

The 747 used for Air Force One has 4,000 square feet of space inside on three levels. In addition to having a large office and a conference room, the plane also houses a medical suite and a doctor. The doctor is permanently assigned to Air Force One. The plane has two food preparation galleys that can feed 100 people at a time. There are also quarters on the plane for those people who travel with the president, including senior advisors, Secret Service, and the press. In addition, several cargo jets typically are used to carry extra provisions, people, and equipment. The $179,750 cost per hour estimate includes fuel, maintenance, engineering support, repairs, food and lodging for the pilots and crew, and other costs. It also includes the cost of military staffing for the onboard communications equipment. The cost may also include the costs of flying extra aircraft and costs of advance scouting trips to the destination to make sure that everything goes as planned. When Air Force One is used for official business, the taxpayers must pay for the traveling costs for the president’s immediate family, Secret Service detail, and the White House staff who are traveling with the president. When Air Force One is used for political purposes, the president’s campaign fund is required to reimburse the government for the cost of food, lodging, and other related expenses. The campaign fund must also reimburse the government for the amount that is the equivalent of airfare that would have been paid if a commercial airline had been used.

The same reimbursement policy is in effect for trips that are categorized as personal trips; the president must reimburse the government for the cost of food, lodging, comparable airfare, and other related expenses. Questions ⚫ Is the $179,750 cost per hour a fixed, variable, or mixed cost? Explain. ⚫ Exact details about the cost composition of the Air Force One travel are kept secret to protect the president. Use your imagination, and the reading above, to make a list of the costs that you think might be included in $179,750 per hour cost estimate. ⚫ Categorize each cost in your list as fixed, variable, or mixed. ⚫ The number of trips taken by a president in any given year fluctuates and is dependent on the political climate, crises, economics, and the like. How useful do you think this cost per hour is? ⚫ What purpose(s) can the $179,750 cost per hour be used for? Are there any purposes for which that cost is not representative of the “true” cost? ⚫ Can you think of a better way to represent/communicate the cost of Air Force One? ⚫ Do you think the reimbursement policy is fair to the president? Why or why not? ⚫ Do you think the reimbursement policy is fair to the taxpayers? Why or why not?

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