Review Apple’s income statement in Appendix A for the year ending September 30, 2017, and identify its net income for 2017.

1. Is Apple’s net income prepared using absorption costing or variable costing?

2. Review Apple’s balance sheet data in Appendix A as of September 30, 2017, and September 24, 2016. What amounts (in $ millions) does Apple report for inventory at each of these balance sheet dates?

3. Assume Apple’s fixed overhead costs equal 10% of the total reported inventory cost at each of these two balance sheet dates. Compute Apple’s 2017 net income under variable costing. Refer to Exhibit 6.11.