Yes, because R&D, shipping, advertising, assembly, packaging, software development, and three years of updates is 100% free.

Come on, guys. You're perpetrating the lies that the trolls use.

Beat me to it!

*sigh*

There's always this comment.



First, in figuring gross margins for a product things like R&D, advertising and software development are generally. not included.

The other costs you've mentioned are of course.

But, more than that. This tear down is only one perspective of a total analysis. I don't think anyone who does these is claiming Apple is actually making 50% on these devices. They are simply looking at the things they are able to analyze.

Chill.

My thoughts exactly. The development time has to be taken into account, but too many times people see stuff like this and start talking about "greedy corporations." Don't get me wrong because there is greed in some corporations just as there is greed in many other areas of society. OTOH it's not a crime to want to make a profit. But I think this article overstates the profit because it fails to account for all of the expense that went into developing the ipad.

Fixed it for you

+1 Never mind the real facts, just spread lies about how Apple is ripping everyone off... If anything companies that don't make the OS, but simply modify someone else's work, and try to sell their tablets for just as much are ripping people off.

The article title states that Apple is "netting" 51% profit. That means that they are claiming that that is what Apple is making.

So AI's headline is wrong and misleading. But the overall gist is that this is purely a hardware gross margin.

Additionally the original EET article is more a comparison of previous to new iPad hardware costs and assuming those are the bulk and most variable of the costs between the two, it seems like a reasonable thing to be looking at.

It's plainly obvious that after accounting for software updates, R&D and shipping costs that Apple's margins on the new iPad are slim. After all, if they sell 50M of these this year, a conservative figure, they'd manage a meager $15 billion in gross profit. Just how much R&D shipping and assembly can $15 billion or more cover?

/s

Only partially true. It is possible to assign any direct costs to COGS (cost of goods sold) regardless of the category. The key is whether it's a direct cost or not. For example, if you offer a $50 rebate on the product (where the rebate is tied directly to the purchase of the product), it is possible to include that in COGS.

Even then, there's some gray area.

Direct costs - almost always included in COGS:
- Materials
- Assembly labor
- Inbound shipping
- Direct quality labor (i.e., QC employees)
- Labor for receiving and shipping goods
- Packaging materials
- Disposal of scrap (or recovery of value for scrap)
- Rejected product
- Rework costs

Direct costs that may or may not be included in COGS, depending on corporate accounting standards:
- Manufacturing overhead like utilities and other costs that change depending on the quantity shipped
- Quality overhead
- Some marketing costs (for example, rebates or other bonuses paid to distributors based on volume)
- Very specific development costs (not usually included in COGS but can be if the cost can be directly tied to quantity shipped. For example, if there were a cost for registration and customization of a product for each customer, that could be a direct cost)
- Licensing costs (very frequently included in COGS, but it depends on the license agreement)

Indirect costs - not included in COGS. In general, these are costs that you have to spend regardless of how many units are shipped:
- Product development
- General marketing and sales costs
- General manufacturing overhead costs (those costs that don't change regardless of volume shipped)
- Corporate overhead
- Legal costs