Learning curve analysis states that the more experience people have with doing a task, the more efficient they become in doing that task. As production involves intensive labor usage, learning curve analysis is appropriate to use to use to estimate the cost of the new competitive bid. Seacraft is placing a bid to produce a customized, unique product. The company has had previous experience in producing a similar product for another customer. Because of Seacraft's previous experience, its costs to produce a similar product will be less time consuming and consequently lower than if the company had never produced this type of product before. Seacraft can therefore set its bid lower because of its anticipated lower costs.
Simulation is a process of changing key variables to determine the possible change in the optimal solution because of changes in the variables. It is used to define how sensitive the project (sales for example) is to a change in those variables. Continuous probability simulation is not the best method for Seacraft to use to estimate the cost of the new competitive bid.
Regression analysis is a quantitative method that is used to find an equation for the linear relationships between or among variables. That result can be used to draw conclusions and make forecasts. To use regression analysis, historical data is required for the variable that we are forecasting or for the variables that are causal to this variable. If historical data is not available, regression analysis cannot be used. Even when historical data is available, if there has been a significant change in the conditions surrounding that data, its use is questionable for predicting the future. Regression analysis is not the best method for Seacraft to use to estimate the cost of the new competitive bid.
Expected value analysis is an effective method to use in conditions of risk. It is calculated by multiplying each possible outcome by related probability added up together. In other words it is weighted average of possible outcomes. It is used to select the best of given alternatives. Expected value analysis is not the best method for Seacraft to use to estimate the cost of the new competitive bid.
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