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Terms of fixed and variable costs

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Apple Computer's cost to produce the components, the headphones and the packaging it ships in comes to $21.77 for the iPod shuffle. That's about 28% of the device's retail price of $79.

a. Is Apple making $57 profit per shuffle? If not, explain Apple's other costs in terms of fixed and variable costs (give examples).

b. If Apple reduced its price for the shuffle, what do you think would happen to their profit? What impact would the price decrease have on their competitors? Explain by considering the elasticity of shuffles).

Reference no: EM13135247

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