Cost Expense Analysis

Tier I
Supplier/Division Cost
= [Materials + Direct Labor+ Manufacturing
Overhead] x [1 + Supplier Overhead+ Supplier
Profit] + Tooling Expense+ Facilities Expense+
Engineering Expense
Tier II
Automanufacturer Cost
= [Supplier Cost + Assembly Labor+ Assembly
Overhead] x [1 + Manufacturing Overhead+
Manufacturing Profit] + Engineering Expense+
Tooling Expense + Facilities Expense
Tier III
Retail Price Equivalent
= Manufacturer Cost x Dealer Margin
NOTES:    
Supplier Overhead = 0.20
Supplier Profit = 0.20
Manufacturer Overhead = 0.25
Manufacturer Profit = 0.20

Dealer Margin
= 0.25


SOURCE: Energy and Environmental Analysis, Inc., “Automotive Technologies To Improve Fuel
Economy to 2015,” report prepared for the Office of Technology Assessment, June 1995, p. 9-5.