Manceville Air has just produced the first unit of a large industrial compressor

Question

Manceville Air has just produced the first unit of a large industrial compressor that incorporated new technology in the control circuits and a new internal venting system. The first unit took 112 hours of labor to manufacture. The company knows from past experience that this labor content will decrease significantly as more units are produced. In reviewing past production data, it appears that the company has experienced a 90% learning curve when producing similar designs. The company is interested in estimating the total time to complete the next 7 units. Your job as the production cost estimator is to prepare the estimate:

Explanation / Answer

Calculation of beta coefficient Learning percentage 0.9 The learning coefficient (beta) is -0.152 Unit Number (quantity produced, pieces) Unit Cost (hrs/unit) Cum Total Cost (hrs) Cum Average Cost (hrs/unit) 1 112.00 112.00 112.00 2 100.80 212.80 106.40 3 94.78 307.58 102.53 4 90.72 398.30 99.57 5 87.69 485.99 97.20 6 85.30 571.29 95.21 7 83.32 654.61 93.52 8 81.65 736.26 92.03 9 80.20 816.46 90.72 10 78.93 895.38 89.54 11 77.79 973.17 88.47 12 76.77 1049.94 87.49 13 75.84 1125.78 86.60 14 74.99 1200.77 85.77 15 74.21 1274.98 85.00 16 73.48 1348.46 84.28 17 72.81 1421.27 83.60 18 72.18 1493.45 82.97 19 71.59 1565.04 82.37 20 71.03 1636.07 81.80

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