Answer (D) is correct . The learning curve reflects the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter. Ordinarily, the curve is expressed in a percentage of reduced time to complete a task for each doubling of cumulative production. One common assumption in a learning curve model is that the cumulative average time (and labor cost) per unit is reduced by a certain percentage each time production doubles. Given a $120 cost per unit for the first 100 units and a $72 cost per unit when cumulative production doubled to 200 units, the learning curve percentage must be 60% ($72/$120). If production is again doubled to 400 units (four batches), the average unit labor cost should be $43.20 ($72*60%). Hence, total labor cost for 400 units is estimated to be $17,280 (400 units*$43.20).
Answer (A) is incorrect because The cost of the items in the fourth batch equals $4,320.
Answer (B) is incorrect because The amount of $10,368 is based on the assumption that the cumulative average unit labor cost is reduced by the learning curve percentage with each batch, not each doubling of output.
Answer (C) is incorrect because The amount of $2,592 represents the labor cost of 100?units at the unit rate expected after another doubling of production to eight batches.
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