Apple’s $79 iPod shuffle Costs $21.77 to Produce

One common complaint from Apple naysayers is that the brand carries a luxury tax, and this is a point that even Microsoft is happy to point out in their most recent run of commercials. But, like other luxury items, customers believe the quality is there. The same rule can apply for things like cars, houses, watches, pens, et cetera.  Where Apple is concerned, many users consider the design of the machines to be worth the cost-of-entry, in addition to the robust OS.

Many times though, if a product carries a huge price tag, you can be sure that the cost to produce it wasn’t cheap either. A Rolls Royce may cost $300,000, but the amount of manpower and materials to be put into one is staggering. There’s no 50% profit margin there. But with Apple, it’s a different story. Would you believe, for example, that their $79 third generation iPod shuffle costs a mere $21.77 to produce?

The only word I can think of is “wow”. If Apple earned $200 on a $1,000 MacBook, that would impress me, but the delta between the production costs of the shuffle and its SRP is just staggering! I’ll be the first to admit that I believe Apple’s products are over-priced, but let’s face the facts… many Apple customers are pleased with the quality, and if a company can deliver that kind of reputation while keeping huge profit margins like this, then kudos.

The smaller the component cost as a percentage of price, the higher the potential profit. This suggests the per-unit profit margin on the shuffle is higher than on other iPod models. The component cost for the first iPod touch released in 2007, for instance, amounted to about $147, or about 49% of its $299 retail price. The component cost of the third-generation iPod nano, also released in 2007, amounted to about 40% of its retail price.