Outside of this short story, I personally have never heard "apple" being used an insult. However, there are people that create meaning from mundane things. Gordon Ramsay does this all the time; he's referred to some bad cooks as "donuts," "sandwiches" or even "tacos." Likewise, there's no book that's going to tell you the derogatory meaning of "apple," because it isn't typically used in that way. The author either invented the meaning or it has a very obscure meaning that cannot be found in books. However, just based on context, "apple" probably means "idiot," or something along those lines.

It is just a made up word meaning nothing. I do this all the time with my wife. I'll call her a tulip or a catapiller.

what are you talking about?

apple (plural apples) (derogatory, ethnic slur) A Native American or red-skinned person who acts and/or thinks like a white (Caucasian) person. It's kind of the Native version of Uncle Tom.