I have a minor in Accounting in addition to majors in Organizational Management and Computer Science. I know what I’m talking about. You’re to one who needs to take some classes.

A car should cost the buyer whatever the buyer is willing to pay. Obviously the Tesla Roadster is work over $100,000 because people are paying that for them.

The cost accounting for any manufacturing concern is more black art than white science. There are rules and guidelines about things such as fixed costs and variable costs (which are inherently backwards from how they sound at first thought). Essentially, the costs of manufacturing a product is accounted for as such:

Variable Costs (Annualized):
Total R&D / Length of Product Lifecycle
Plant Depreciation / Length of Product Lifecycle
Machinery Depreciation / Length of Product Lifecycle
Plant Overhead
Salaried Employees wages and benefits
Non-Salaried Employees fixed benefits
Marketing

Fixed Costs:
Materials
Hourly Labor
Shipping

OK, so why are things like salaries variable costs and things like materials fixed costs? Because in cost accounting you are calculating the Cost of Goods Sold per unit.

Let’s say that it takes 300 man hours to build a car at $20 per hour. Labor expense is $6,000. The car contains 3000 # of steel at $1 per pound, which is another $3,000. It costs $500 to ship the car. Total fixed costs for the car is $9500.

Now, the factory that produces the car employs 100 salaried workers whose wages and benefits average $100,000, thus having a $10,000,000 fixed salary expense. The hourly employees each receive $20,000 in benefits regardless of hours worked and it takes 200 workers to build the car bringing in another $2,000,000 in annual expenses. Plant overhead is $2,000,000 per year. Depreciation of the plant and machinery during a 4 year product lifecycle is another $10,000,000 per year.The product has a marketing budget of $20,000,000 per year. Finally, it costs $100,000,000 to design the car and prep the factory for production, yielding $25,000,000 per year during the product lifecycle. Our total variable expenses are $69,000,000 per year.

Let’s assume that the plant builds and sells 10,000 units per year. Our cost structure looks like this:

Fixed Costs: 10,000 * 9500 = $95,000,000
Variable Costs: $69,000,000
Total Costs: $164,000,000
Costs per unit: $16,400

As you can see, if they manage to sell more cars, they make a bigger profit because of the lower variable costs per unit. This is the exact reason why you’ll see a car company talk about projected sales. It’s how they actually budget for variable expenses and know when they need to lay off or hire more salaried employees. Keeping headcount on hourly employees is much less important as the variable costs are much lower.

You can be 100% assured that every auto manufacturer has these numbers figured to the penny. All public businesses keep three sets of books: The tax books, the SEC books, and the management books. The tax books and SEC books do not need to have breakdowns on exact costs per unit, nor even total units sold. Instead you’ll find a line item called Cost of Goods Sold, which is a total of the CoGS for ALL of the products sold by the manufacturer. The management books are the goldmine, and these are what get audited whenever a company is bought or sold, or if the company is seeking credit. The real numbers are in the management books, and accountants make a LOT of money to ensure that the management books are correct.

Jake, if companies knew what it cost to produce a vehicle, they would not be in Chapter 11. There are no accounting or economic laws specifically for car industry: it is either your product cost less to produce then you can sell it or out of business. nobody take a blood bath selling pants or shoes, why cars?

“Energy Secretary Steven Chu was scheduled to announce the loan funding for Ford, Nissan Motor Co. and Tesla Motors Inc. in Dearborn, Mich., congressional officials said. They requested anonymity because an official announcement was pending.”

And don’t forget Daimler already has one fang in his jugular.