This is the cost for the first propeller multiplied by 7 and the product multiplied by .70. This is not the correct way to find the cost for the additional seven units. Find the total cost for 8 propellers. The cost for the additional seven propellers, after completing production of the first propeller, will be the cost for 8 propellers minus the cost for the first propeller.
This is the average cost per unit after manufacturing two propellers multiplied by 8 and the cost of the first propeller subtracted from the product. This is not the correct way to find the cost for the additional seven units because the method used to find the total cost for 8 propellers is incorrect.
The cost for the seven additional propellers will be equal to the total cost for 8 propellers minus the cost for the first propeller. The total cost to produce eight propellers, using the Cumulative Average-Time Learning Model, is $20,000 (2 × .70) (2 × .70) (2 × .70), or $20,000 (2 × .70)3 = $54,880. The cost of the first propeller is $20,000. Therefore, the cost for seven additional propellers will be $54,880 ? $20,000, which equals $34,880.
This is the total cost for 8 propellers. The cost for the seven additional propellers will be equal to the total cost for 8 propellers minus the cost for the first propeller.
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The estimated cost of an order for seven additional propellers, after completing production of the first propeller, would be