Sources used in this document:

The most useful method of analyzing Magna'a annual sales to cost is through analysis of the firm's Gross Margin and Selling, General, and Administrative Expenses (SG&A). The 2009 Annual Report identifies "Gross margin decreased 22% or $746 million to $2.72 billion for 2008 compared to $3.46 billion for 2007 and gross margin as a percentage of total sales decreased to 11.5% compared to 13.3%" (Magna International Annual Report. 2009. P.39). "The calculation of the Gross Profit is: Sales minus Cost of Goods Sold. The Cost of Goods Sold consists of the fixed and variable product costs, but it excludes all of the selling and administrative expenses" (Accounting for Management.com. N.D.). From the decline in Gross Margin as well as study of the income statement, Magna's Cost of Goods Sold declined from 2008 levels of $20.9 billion to $15.69 billion, while Selling, General, and Administrative Expenses declined from 2008 levels of $1.31 billion to $1.26 billion in 2009 (Magna International Annual Report. 2009. P.46). . What this decline indicates is significant reductions in variable cost related to labor and wages concomitant with a large reduction in sales volume. Additionally, depreciation expense declined by approximately $150 million, while interest expense increased by approximately 70 million (Magna International Annual Report. 2009. P.46).

Has the firm's cost structure changed over the period noted in the annual report?

For the period covered by the Annual Report 2009, Magna costs reflected a shift away from higher variable costs in the form of labor and wages to a greater reliance on fixed costs; evidenced by cap-ex spending in