Refer to Appendix 2 and calculate the incremental contribution realized by adding the new iPhone 4 if sales during the first six months of launch were five million units. However, the company also estimated that 30 percent of iPhone 4 sales came from customers who would have purchased the iPhone 3G but instead purchased the base model of the iPhone 4.

Apple introduced the iPhone 4 in 2010 but still continued to offer the iPhone 3G. The 16GB base version of the iPhone 4 was priced at $199, with unit variable costs equal to $187. The iPhone 3G’s price had decreased to $99 by the time the iPhone 4 was introduced, and its unit variable costs were $65.