Chapter 14 Blog: Who pays what to whom?

http://www.cbc.ca/consumer/story/2009/04/16/f-cardfees.html

Summary

                        So it is clear, the web of fees that's woven around every transaction involving our debit and credit cards? There is the annual fee, the interest you're charged if you don't pay your credit card bill in full every month. That goes to the bank. There's a lot more, it’s what has retailers complaining bitterly. There's the merchant discount rate and the interchange fee, which consumers don't see at all. There's the fee that merchants have to pay to the company through the process of your payment when one use their debit card a non-profit organization that oversees the system that allows for direct payment. Which result in a small fee the retailer usually adds towards the use of your debit card. On the other hand, retailer who accepts cash, will spent time on doing daily transaction, it consumes a lot time. Merchants pay two to four per cent of the sale price in various transaction fees whenever they accept a credit card for payment. It's the interchange fee involved in credit card transactions that's making retailers angry. The Retail Council of Canada claims Canadians paid $4.5 billion in "hidden" credit card fees alone last year. The study also found that merchants preferred debit cards (53 per cent), followed by cash (39 per cent) and then credit cards (five per cent).

Connections

                        This article is connected to chapter 14.2, the bank credit card unit. In this unit it talks about the bank credit card transactions and how it occurs when the customer makes a purchase, in a store accept customer’s credit card. The fact that there is an extra fee to the cost of our credit cards and or debit cards is just too much. The retailers are charge with an extra interchange fee, which result in many stores in charging the consumer and extra fee. Store clerk will write up a voucher, run a sale slip, ensure the customer sign the slip, given one to the customer and two back to the stores, place the slip into an envelope and record the gross amount on a summary slip to the bank.

Reflections

                        I personally find the fact that retailer are charging consumer more just so they are able to pay the extra interchange fee is just too much. At the same time, the major credit cards businesses are also taking up to two to four percent of the sales of the various transactions fees. Many merchants are accepting money in such a way because of their extra cost of transaction fees. Sure enough, a retailer who accepts cash will also have to spent time preparing the cash deposits. That takes time. If you've been in the business a long time, they may view it as just the cost of doing daily business. But it’s sort of unfair for Canadians last year to make a payment of $4.5 billion in the “hidden” credit card fees.

Chapter 11: Figuring Apple's App Store gross profit

http://news.cnet.com/8301-13579_3-20008540-37.htm

Summary

                In the article have just review, the Apple's iTunes App Store may be the biggest mobile application around but there aren’t much of revenue generators for the company. Apple claims that they run the App store at ''a bit over break-even.'' Apple spends roughly $1 billion to developing up to 5 billion free and paid application downloads-- So far Apple's total gross profit is on $189 million since the day it’s launched. That is about only 1 percent of the company's $33.7 billion gross profit during the same period. Using the same pricing scheme for iTunes, with a 70 percent ($1.04) to the developer, $0.30 plus 2 percent of the ASP ($0.23) to the credit card company, and 1 percent ($0.02) per application for processing the (storage and delivery), Apple's Store gross margin on revenue from paid apps ($428 million) this is roughly 44 percent, or $189 million in gross profit. This does not factor in the roughly $81 million Apple has spent since they launch the App Store and they deliver the 4 billion free apps that have been downloaded. So thus the even though the App Store is through the roof, Apple certainly does not bother because Apple's main purpose is to sell hardware. The App Store is consider to be its secondary business.

Connection

                This article is connected to chapter 11 because of the gross profit income. Gross profit represents the trading business, the excess of net sales over the cost of goods sold. In the article, the Apple iTunes App Store is losing revenue form this programme. Apple spends roughly $1 billion to develop up to 5 billion apps which result in losing of money. But thie earning will make up for the others hardware being sold which will reslut in the gross profit that didn’t earn from the apps. This way people will buy the hardware for the cheap apps.

Reflections

                As I can see in this article, an accountant must understand that they can be losing money from certain part of their business like for example the appstore, but at the same time they should know how they can it make up doing other sales. The gross profit can be increasing and decreasing at anytime of the business. Yet, it can be easily make up by selling other goods for example their Iphones, Imac, etc. Even though Apple is down in gross profit, they will still be able to make up for the money from their sales of their hardware. If they were to increase the price of their apps to be able to make up for their gross profit, less people will buy their hardware; mainly people buy Apple’s hardware because they are able to obtain the apps at a really cheap price. As a result, this leads Apple to the decent amount sales every year. A very smart tactic.