Using indirect cost multipliers to estimate the total cost of adding new technology in the automobile industry
In addition to the direct costs incurred during the vehicle production process, a manufacturer incurs certain indirect costs. These costs may be related to production, corporate operations, or selling. Cost analysts often use markup factors that relate indirect costs to the changes in direct costs. These factors are often called retail price equivalent (RPE) multipliers. However, there are concerns in using RPE multipliers in cost analysis. This study develops modified multipliers, referred to as indirect cost multipliers, and estimates them to range from 1.05 to 1.45 in the short run and from 1.02 to 1.26 in the long run.