7.9

Analyze Apple Inc. by segment

Segment disclosure by Apple Inc. (AAPL) provides sales information for its major product lines for three recent years as follows (in millions):

Segment		Year 3		Year 2		Year 1
iPhone		$136,700		$155,041		$101,991
iPad		20,628		23,227		30,283
Mac		22,831		25,471		24,079
Services		24,348		19,909		18,063
Other Products		11,132		10,067		8,379
Total sales		$215,639		$233,715		$182,795

The Services segment includes sales from iTunes Store, App Store, Mac App Store, TV App Store, iBooks Store, Apple Music, AppleCare, and Apple Pay. The Other Products segment includes sales from Apple TV, Apple Watch, Beats products, iPod, and Apple-branded accessories.

a. Prepare a vertical analysis of Year 3 sales. (Round percentages to nearest whole percent.)

Segment		Year 3 Sales		Percent of Total Sales
iPhone		$136,700		fill in the blank 72c5dd0daf9bfc7_1%
iPad		20,628		fill in the blank 72c5dd0daf9bfc7_2%
Mac		22,831		fill in the blank 72c5dd0daf9bfc7_3%
Services		24,348		fill in the blank 72c5dd0daf9bfc7_4%
Other Products		11,132		fill in the blank 72c5dd0daf9bfc7_5%
Total sales		$215,639		fill in the blank 72c5dd0daf9bfc7_6%

Which product had the greatest percentage of Year 3 sales? Which product had the least percentage of Year 3 sales?

Greatest percentage		iPhone
Least percentage		Other Products

Feedback

Vertical analysis is a proportional analysis of a financial statement, where each line item on a financial statement is listed as a percentage of another item. The total should equal 100%.

b. Prepare a horizontal analysis of the change in sales from Year 1 to Year 3. (Round percentages to nearest whole percent. For those boxes in which you must enter subtractive or negative numbers use a minus sign.)

						Increase (Decrease)
Segment		Year 3		Year 1		Amount		Percent
iPhone		$136,700		$101,991
iPad		20,628		30,283
Mac		22,831		24,079
Services		24,348		18,063
Other Products		11,132		8,379
Total sales		$215,639		$182,795

Income statements under absorption costing and variable costing

Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (173,000 units) during the first month, creating an ending inventory of 18,000 units. During February, the company produced 155,000 units during the month but sold 173,000 units at $530 per unit. The February manufacturing costs and selling and administrative expenses were as follows:

	Number of Units		Unit Cost		Total Cost
Manufacturing costs in February 1 beginning inventory:
Variable	18,000		$265.00		$4,770,000
Fixed	18,000		20.00		360,000
Total			$285.00		$5,130,000
Manufacturing costs in February:
Variable	155,000		$265.00		$41,075,000
Fixed	155,000		23.10		3,580,500
Total			$288.10		$44,655,500
Selling and administrative expenses in February:
Variable	173,000		15.40		$2,664,200
Fixed	173,000		4.00		692,000
Total			19.40		$3,356,200

Prepare an income statement according to the absorption costing concept for February. Enter all amounts as positive numbers.

Fresno Industries Inc.
Absorption Costing Income Statement
For the Month Ended February 28
Sales				__
Cost of goods sold:
Beginning inventory		__
Cost of goods manufactured		__
Total cost of goods sold				___
Gross profit				___
Selling and administrative expenses				___
Operating income				___

b. Prepare an income statement according to the variable costing concept for February. Enter all amounts as positive numbers.

Fresno Industries Inc.
Variable Costing Income Statement
For the Month Ended February 28
Sales				___
Variable cost of goods sold				___
Manufacturing margin				___
Variable selling and administrative expenses				___
Contribution margin				___
Fixed costs:
Fixed manufacturing costs		___
Fixed selling and administrative expenses		___
Total fixed costs				___
Operating income				__