Question

Park Company manufactures high technology testing instruments. The instruments are complex and not many units of any particular model are sold. The last unit of model MF-59 sold was the eighth off of the assembly line. The labor cost for that unit was $24,565.00 and required 614.1250 hours of labor. The fourth unit, produced last month, required 722.5000 hours of labor.

Required:

a. Assuming that learning has been consistent for this product, how many hours did it take to produce the first unit? (Round your answer to 4 decimal places.)

b. Assuming that the hourly wage rate has remained the same, what was the labor cost to produce the second unit?

Answer 1

Answer

• First calculate the Learning Curve %
  >8^th unit = 614.1250 hours
  >4^th unit = 722.5000 hours
  Learning Curve = 614.1250 / 722.5000 = 85%
• Requirement [a]

Hours taken to produce first unit = (722.5000 hours / 85%) / 85%
= 1000.0000 hours

• Requirement [b]
  labor cost to produce 2^nd unit = ($ 24565.00 / 85%) / 85%
  = $ 34,000