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olsan Technologies had received a contract to produce two units of a new cruise missile guidance control. The first unit took 5,000 hours to complete and cost $30,000 in materials and equipment usage. The second took 4,500 hours and cost $24,000 in materials and equipment usage. Labor cost is charged at $25 per hour. The prime contractor has now approached Jolsan Technologies and asked to submit a bid for the cost of producing another 20 guidance controls. Use Exhibit 6.4 and Exhibit 6.5. What will the last unit cost to build

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jepessoa

Answer:

$1,901,385

Explanation:

First unit produced by lambda took 5,000 hours to produce and required $30,000 worth of materials and equipment usage.

The second unit took 4,500 hours and used $24,000 worth of materials and equipment usage.

learning rate = time needed to produce second unit / time needed to produce first unit = 4,500 hours / 5,000 hours = 90%

materials and equipment usage rate = $24,000 / $30,000 = 80%

using the attached table of cumulative values, we can determine the cumulative improvement factors needed to solve this question:

Olsan's accumulated cost for producing 20 more guidance controls

  • work hours = 4,500 x 14.61 (90% and 20 units) x $25 per hour = $1,643,625
  • materials and equipment = $24,000 x 10.74 (95% and 20 units) = $257,760
  • total = $1,901,385

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