Does it actually cost Apple $167 to produce the Iphone 5?

I have read numerous articles talking about how much it costs Apple to make an iPhone 5. Apparently, it costs $167 dollars. Is that because they buy the parts in mass production so they get everything a lot cheaper or is the actual phone worth $167. Apparently the battery costs $3.Is that because they have bought so many that they can get it down to such a cheap Price?

The biggest reason is because the phones are built in third world countries where labor is extremely cheap.

Correct. They purchase on economy of scale, so the more they buy, the cheaper they become for each unit.

Obviously, apple does not pay what you wold for parts because they produce millions of everything. Apple barely makes any profit on the actual sale price of the Iphone, and certainly not enough to keep the company running. Were they make their money is in the contract. Although they charge hundreds of dollars for service, it only costs them a fraction of that to provide you with that service. This is why without a contract the Iphone costs $650.00. The cost of producing the Iphone is also going up. Right now Apple is paying their employees in manufacturing plants about $1.50 an hour, but labor costs are rising.
Ps: Joe Irish, cite your sources. You copied and pasted from the article below

If you were one of the lucky few to sign on to Apple's website overnight and grab a new iPhone 5 before they sold out, you likely paid anywhere between $199 and $399 for the privilege. But did you ever stop to wonder how much money Apple was making from each sale? Research firm UBM TechInsights did the math, and the final price tag to build an iPhone 5 turns out to be $167.50 - making it Apple's most expensive phone ever.

Some of the most impressive components of the iPhone 5 actually don't wind up being very expensive on their own. UBM TechInsights estimates that the new, thinner 4-inch touch display costs Apple $18 with the touch screen glass costing another $7.50. The camera runs about $10, the Wi-Fi/bluetooth/GPS costs $4, and the battery only runs $3. The most expensive part of the phone is the new A6 processor, at $28 each.

That may not seem like a large margin for Apple - just $32. But remember, that $199 you paid is just your cost for the phone with a new two-year contract. Your cell carrier had to pay Apple much more (and here's why). After all, an unlocked out-of-contract phone sells for $649, allowing the world's richest company plenty more room to get even richer.

here is how they make so much money
http://www.tecca.com/columns/why-buying-a-smartphone-without-a-service-plan-is-so-expensive/

Yes, $167 seems about right. Yes, Apple buys parts in the millions, so they would obviously get a discount.