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Andy Hertzfeld revealed that the CPU for the original $2495 Macintosh cost just $9.00. How much did the rest of the computer cost? Was the markup really greater than Pepsi's markup on sugar? How much would it have cost to use 512K memory instead of 128K at the start?

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    Should it help anybody, the active components are really just: the 68000, a Zilog 8530 SCC, a 6522 and one of Apple's IWM disk controllers. There's memory-mapped video with a single output mode and audio is a combination of extra data fetched by the video circuitry and an on-off toggle routed out from the 6522. The variable disk motor speed is also keyed to the audio fetching mechanism. There's no logic for indicating a bus error to the 68000, and even proper phase between video and 68000 RAM access is handled at launch in software. It's a really simple machine. – Tommy May 22 at 7:18
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    @Wilson because the ROMs were protected by copyright and Apple were fairly diligent in enforcing it. The software is what made the Mac special (and expensive), not the hardware. – JeremyP May 22 at 8:26
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    So should the BOM include the software cost? – Wilson May 22 at 8:29
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    Actually, I forgot: the keyboard is connected as a serial device, and has an 8021 to deal with that. Also there's a custom Apple real-time clock. – Tommy May 22 at 8:56
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    @Wilson The BOM is the incremental cost of building a machine. It does not include software development costs (it should include the media cost of disks included with the machine), hardware development (engineering) costs, costs of custom molds, tooling, etc. to produce the hardware, all of which are required before producing the first machine. It also does not include warranty support, marketing and other real-world (but people not machine) costs. And of course it does not include profit (which is the motivation of most manufacturers). All those "costs" are built in to the retail price. – manassehkatz-Reinstate Monica May 22 at 14:46
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The incremental cost, or "BOM cost", of the original 128K Macintosh was approximately $750 at the time.

This answer is trivially determined from the 1982-83 Apple Computer Inc. public financial results, along with the historical account provided by Andy Hertzfeld. Historical Apple Computer Inc. financial results indicate a Gross Margin of 50.6% in 1982 and 48.5% in 1983 ref.

From the financial statements at the time, it is clear that Apple was aiming for ~50% gross margins in its business. These margins would compress in later years, undoubtedly due to the pressures of rising competition in the personal computer market. However, Mr. Hertzfeld states that the Macintosh team was aiming to match the then-current profit performance of the Apple II.

We also know from Mr. Hertzfeld's historical account that the Macintosh team was still aiming for a wholesale price of $1,500 late in the development cycle (with a stated final retail price of $1995). Given the 50% gross margins, this would strongly suggest a production cost of $750 per unit.

Knowing that the system cost $750 to produce at the time makes it easy to work backwards to a BOM cost structure, albeit with some conjecture about the relative costs of different components. My conjecture would lead me to a breakdown such as: Printed Circuit Boards (x2)......$60 Major IC components (x6).........$30 Additional IC components (x43)...$86 Discrete electronics.............$44 Connectors and wiring............$40 CRT..............................$100 Case.............................$60 Keyboard.........................$60 Packaging & Media................$20 (manual, disks, etc.) Manufacture/Assembly/Distro......$250 Total............................$750

  • Agree with general concept. But allocating 1/2 the cost to a nebulous Manufacture/Assembly/Distro seems a bit too vague. – manassehkatz-Reinstate Monica May 26 at 17:26
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    This is wrong on many fronts. First of all, 50% gross margin means a $1500 computer costs $750 to make. Compare margin to markup: en.wikipedia.org/wiki/Gross_margin Second of all, Apple's margin doesn't include dealer margin. If the dealer's margin is 20%, the computer would cost $600. Third, the margin reported on a financial statement is likely muddied in various ways. – Aleksandr Dubinsky May 27 at 5:51
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    To drive the third point home, today Apple reports 38% gross margin, even though the $1k iPhone X costs about $370 to make (or, 60% margin, if including distribution costs). – Aleksandr Dubinsky May 27 at 6:11
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    Sorry. Obviously, not an accountant and was mistaken on the use of the term "gross margin". Correcting my answer to fix those numbers. As far as retail markup goes, my takeaway from the historical account was the $1500 price was wholesale and the final retail prices was suppose to be $1995, accounting for retail markup. – Brian H May 27 at 15:28
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I don't have a specific answer, but a good rule of thumb for machines built in the mid-eighties was that buying the chips for a machine at retail would end up costing about a third of the retail price of the complete machine.

Obviously, there are additional costs for PCB, connectors, wiring, assembly, the casing, the PSU, the CRT and its circuitry for an all-in-one Mac, and so on. But the chip prices shrank considerably when you started buying in hundreds of thousands.

  • And wasn't there another rule of thumb that buying parts wholesale was 3 times cheaper than retail? So 9x total? Anyway, while it helps to provide context on how other companies priced machines, the question is specific to the Macintosh, which Andy Hertzfeld accuses of being particularly overpriced. – Aleksandr Dubinsky May 22 at 16:10
  • The version I heard was that the retail price of the complete machine was three times manufacturing cost; if labor is only 5-10% of this, that's pretty nearly the same as saying the retail price of the complete machine is three times the wholesale cost of the components. Do you have a source for your version? – rwallace May 22 at 23:00

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