Solution:
(a) The standard equation for the learning curve: Tn=T1nb
Here,
n is the number of financial proofread
Tn = Amount of time required to read n proofreads
T1 = Amount of time required to read first financial proofread
b = learning curve factor which is equals to ln(p) / ln(2)
here ln(p) is the natural logarithm pf p
p =percentage of learning (in this case it is 50%)
Using the information given in the question:
b = ln(0.5) / ln(2) = -1
Number of financial proofreads | T1nb | The time required to read | hours * 60 |
1 |
6*(1-1) | 6 hours | 360 minutes |
2 | 6*(2-1) | 3 hours | 180 minutes |
4 | 6*(4-1) | 1.5 hours | 90 minutes |
8 | 6*(8-1) | 0.75 hours | 45 minutes |
16 | 6*(16-1) | 0.375 hours | 22.5 minutes |
(b) The labor time cost is $11 per hour.
Cost of financial proofreading = Cost per hour * Number of hours required to read
Cost of proofreading 1st financial statement = $11 * 6 hours = $66
Cost of proofreading 16th financial statement = $11 * 0.375 hours = $4.125
The percentage of proofreading cost for 16th year to cost of proofreading for 1st year =
= Cost of proofreading 16th financial statement / Cost of proofreading 1st financial statement
= $4.125 / $66
= 0.0625 = 6.25%
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