Question 3 Mass Balance Company is manufacturing a new digital scale for use by

Question

Question 3 Mass Balance Company is manufacturing a new digital scale for use by large chemical companies has come up with a marketing hit. The original production run was for 400 units and these have been produced and shipped. Now, marketing has forecast a demand for an additional 200 units (if the price is right"). The first scale took 75 hours of direct labor and the second took 70 hours to complete. Per Adam Smith and his academic descendant Professor Culp we will assume the product's price contains the components material, labor, overhead, and profit at $150labor hour expended. a. What is the learning rate? b. What is the estimated time for the 600th unit? c. What was the estimated total time for producing the first 400 units? d. What was the average selling price for the first 400 units? e. What could be the average selling price for the next 200 units? f What kind of price discount would you recommend to marketing for the next 200 units under consideration?

Explanation / Answer

a)

Learning rate = time taken by 2nth unit/time taken by nth unit

Learning rate = Time taken by 2nd unit / Time taken by 1st unit

Learning rate = 70/75 =0.933

b)

A learning curve is geometric with the general form Y = aXb.

Y = cumulative average time per unit or batch.

a = time taken to produce initial quantity.

X = the cumulative units of production or, if in batches, the cumulative number of batches.

b = the learning index or coefficient, which is calculated as: log learning curve percentage ÷ log 2

> For 600 units,

b = log.933/log 2 = -0.1

Y = 75*(600)^-0.1 = 39.559

Time taken for 600 units = 39.559*600 = 23735.45 hours

> For 599 units

Y = 75*(599^-0.1) = 39.57

Time taken for 599 units = 23702.43 hours

Time taken for 600th unit = Time taken for 600 units - Time taken for 599 units

= 23735.45 - 23702.43 = 33.02 hours

c)

Total time for producing 400 units = 400*75*(400^-0.1) = 16478.41 hours

d)

Selling price is 150 per labor hour expended

Selling price for 16478.41 hours = 16478.41 * 150

Average selling price = (150*16478.41)/400 = $6179.4

e)

Time taken for 600 units = 23735.45 hours ( already calculated in part b)

Time taken for next 200 units = Time taken for 600 units - Time taken for 400 units

= 23735.45 -16478.41 = 7257.04 hours

Selling price for 7257.04 hours = 150*7257.04

Average selling price for next 200 units = (150*7257.04)/200 = $5442.78

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.