Module 4 Self-Test: Problems Saved Help Save& Exit Submit Lazer Technologies Inc
ID: 400155 • Letter: M
Question
Module 4 Self-Test: Problems Saved Help Save& Exit Submit Lazer Technologies Inc. (LTI) has produced a total of 20 high-power laser systems that could be used to destroy any approaching enemy missiles or aircraft. The 20 units have been produced, funded in part as private research within the research and development arm of LTI, but the bulk of the funding came from a contract with the U.S. Department of Defense (DoD). Testing of the laser units has shown that they are effective defense weapons, and through redesign to add portability and easier field maintenance, the units could be truck-mounted. points DoD has asked LTI to submit a bid for 100 units. The 20 units that LTI has built so far cost the following amounts and are listed in the order in which they were produced: Use Exhiblt 64 and Exhibit 6,5 CoSz NUMBER (S MILLIONS) S MILLIONS) 53.7 3.6 $13.0 8.8 7.4 6.2 5.7 5.2 12 12 13 14 16 17 18 19 20 3.4 3.2 3.2 3.0 2.9 2.8 2.8 4.5 10 4.0 a. Based on past experience, what is the learning rate? (Do not round intermediate calculations. Round your answer to the nearest whole percent.)Explanation / Answer
a.
Estimate the learning curve rate of the given data by averaging learning rate with each doubling of the production as follows:
Learning rate from 1 to 2 units = cost of 2nd unit/cost of 1st unit = 8.8/13 = 0.6769
Learning rate from 2 to 4 units = cost of 4th unit/cost of 2nd unit = 6.2/8.8 = 0.7045
Learning rate from 4 to 8 units = cost of 8th unit/cost of 4th unit = 4.5/6.2 = 0.7258
Learning rate from 8 to 16 units = cost of 16th unit/cost of 8th unit = 3.2/4.5 = 0.7111
Average learning rate = (0.6769 + 0.7045 + 0.7258 + 0.7111)/4 = 0.7045
Approximate learning rate is 70%
ANS. learning rate = 70%
b.
The average cost of the first 100 units can be estimated using the cumulative improvement factor table.
The cumulative improvement factor for the 100 unit at 70% learning rate is 17.79
Cumulative cost of first 100 units = cumulative improvement factor for 100th unit x cost required for 1st unit = 17.79 x $13.0 = $231.27 million
ANS: Cost for 100 more units $231.27 millions
c.
The unit cost of the 100th unit can be estimated using the unit value improvement factor table.
The unit value improvement factor for the 100th unit at 70% learning rate is 0.0935
Unit cost of 100th unit = unit value improvement factor for 100th unit x cost required for 1st unit = 0.0935 x $13.0 = $1.2155 million
Expected cost for last unit = $1.2155
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