Part I Milestone Two Production and Costs

Question one

Describe three key inputs (or factors of production) and fixed and variable costs involved in the production of Apple Iphone 6.


Like many technology based businesses in the world, Apple iphone 6 eschews full integration in favour of outsourcing physical production to cut costs. This dichotomy plays out in the packaging for the apple iphone 6 and other apple products. Capital is therefore vital to the manufacturing of Apple Iphone 6.


The labor pool that contributed to the realization of the Apple iphone 6 includes internal, stateside employees who work in its design, prototyping and finally marketing and sales efforts and external laborers working in foreign factories in Asia. By using external labor for manufacturing, Apple significantly cuts its production costs for the Apple iphone 6.

Natural resources or land

This is another factor of production in manufacturing of Apple iphone 6. The natural resources available to Apples suppliers in Asia and also including the cost and availability of raw materials such as glass for the multi-touch screen, plastic for the casing and silicon for the chipset. The land factor includes any rent Apple pays to the property owners of its stateside facilities including its corporate offices and retail stores globally.

Variable and fixed costs involved in the production of Apple iphone 6

Fixed costs

Fixed costs of Apple iphone 6 include the price of renting a workplace for the time interval of mobile app development. Fixed costs rarely change over a given time frame and are the same meaning it does not matter how much or how little product development is done.

Variable costs

These are the costs incurred in the outside app designing. These costs vary time to time depending on the amount of work done. For instance it may differ from $70 to as much as $300 an time and relies on the complexness of assembling the shed.

Question two

Analyze the factors that impact your choice of inputs to produce the chosen product or service


Flexibility implies the ability of Apple Company to satisfy varied customers requirements. Flexibility and product variety are inter-related. If more variety of Apple iphone 6 is to be manufactured, the manufacturing facilities will have to be commonised and depending upon the volume, the extent of commonalities will require to be justified.


Efficiency measures the speed and the cost of manufacturing Apples iphone 6. Efficiency is greatest when the product is produced massively and to massively produce a product it requires greater sales volumes.

Lead time

Lead times more appropriately called delivery lead times anticipated by the Apple Iphone 6 customers for instance how soon the demand has to be met without losing on sales. Lead time is a major factor in a competitive market.

Capacity of the company

The projected sales volume is a key influencing factor in establishing whether the firm should go in for intermittent or continuous process. Normally fixed costs are high for continuous process and low for intermittent process and variable costs are more for the intermittent process and less for continuous process.

Question three

Examine the production decisions that you would make based on the analysis of the factors impacting the choice of inputs to produce the chosen product or service.


Microeconomic data can be reduced to mathematical constructs from which analysis of logical decisions are made. At Apple Company which manufactures iphone 6 mobile phones the microeconomic data from this company shows that its customers have preference of these phones at certain price.

State of the economy

Apple iphone 6 is good at the moment but leading economic indicators forecast a downturn during festive seasons such Christmas and Easter holidays. This are the peak seasons when large percentage of firms annual sales occur. When the economy is to slide during the Christmas season, Apple Company would be better off thus selling the phones at a lower price than the competition, maintaining a profit that would be lower than the previous year.

Nature of the competition

Firms compete basing on their prices and it is therefore price reduction that increases demand. When two firms compete and one relatively reduces its prices then that company would outsell the competition.



  1. Tim Hesse (2009) factors of production for IPod Touch
  2. Nirali Shah (2006) Factors of production for developing Mobile Application