Answer (D) is correct . The sum of the direct labor hours for the initial lot of 50 units was 1,000. A second lot of 50 would reduce the cumulative hours per lot to 700 (70%*1,000 hours). A doubling to four lots would reduce the cumulative hours per lot to 490 (70%*700 hours). Thus, for an output of 200 units, the total hours worked would be 1,960 (4 lots*490 hours). Subtracting the 1,000 hours required for the first 50 units from the 1,960-hour total gives 960 hours for the last 150 units. Dividing 960 hours by 150 units produces a per-unit time of 6.4 hours.
Answer (A) is incorrect because With no learning curve effect, estimated total hours would be 4,000 instead of 1,960, a change of more than 50%.
Answer (B) is incorrect because Fixed costs applied per lot would decline because they are based on labor hours, which are declining.
Answer (C) is incorrect because Due to the cumulative nature of a learning curve, a 10% change in the learning curve does not result in a 10% change in direct labor costs. Given an 80% learning curve, estimated total hours would be 2,560 instead of 1,960.
|
If Moss Point had experienced a 70% learning curve, the bid for the 150 units would