The following case information is for Question 40 and 41 (5+5 =10 marks in total).

You work in the long-run strategic planning group of a large automotive firm and are tasked with following the development of electric vehicles. Your firm has electric cars in development but has not yet decided to enter the battery-powered car market.

One company you follow is Tesla Motors, founded by Silicon Valley engineers, that specializes in high-performance luxury electric vehicles. A recent article in The Wall Street

Journal, entitled "Tesla Motors Approaches Crossroad," describes Tesla's current and expected operating performance. Last quarter, Tesla lost $49 million when it was making 200 cars a week. To break even, Tesla needs to make 400 cars a week. Tesla operates its plant 50 weeks out of the year and is shut down for the remainder of the days in the year for holidays and planned maintenance. While the list price of a Tesla ranges between $60,000 and $100,000 depending on battery capacity and other options, the average price is $75,000.

Requireds

Q40. What is the variable cost of a Tesla automobile and what are Tesla's quarterly fixed costs? (5 marks)

Q41. Why would your firm be interested in knowing about Tesla's fixed and variable cost structure? (5 marks)

The following case information is for Question 40 and 41 (5 + 5 =10 marks in total). You work in the long-run strategic planning group of a large automotive firm and are tasked with following the development of electric vehicles. Your firm has electric cars in development but has not yet decided to enter the battery-powered car market. One company you follow is Tesla Motors, founded by Silicon Valley engineers, that specializes in high-performance luxury electric vehicles. A recent article in The Wall Street Journal, entitled Tesla Motors Approaches Crossroad, describes Tesla's current and expected operating performance. Last quarter, Tesla lost $49 million when it was making 200 cars a week. To break even, Tesla needs to make 400 cars a week. Tesla operates its plant 50 weeks out of the year and is shut down for the remainder of the days in the year for holidays and planned maintenance. While the list price of a Tesla ranges between $60,000 and $100,000 depending on battery capacity and other options, the average price is $75,000. Required: Q40. What is the variable cost of a Tesla automobile and what are Tesla's quarterly fixed costs? (5 marks) Q41. Why would your firm be interested in knowing about Tesla's fixed and variable cost structure