Question

Marshall Co. produced a pilot run of seventy units of a recently developed piston used in one of its products. Marshall expected to produce and sell 1,870 units annually. The pilot run required an average of 0.55 direct labor hours per piston for 70 pistons. Marshall experienced an sixty percent learning curve on the direct labor hours needed to produce new pistons. Past experience indicated that learning tends to cease by the time 1,120 pistons are produced.

Marshall's manufacturing costs for pistons are presented below.

Direct labor	$	10.00	per direct labor hour
Variable overhead		14.00	per direct labor hour
Fixed overhead		30.00	per direct labor hour
Materials		3.00	per unit

Marshall received a quote of $8 per unit from Kytel Machine Co. for the additional 1,800 needed pistons. Marshall frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.

If the pistons are manufactured by Marshall Co., the average direct labor hours per unit for the first 1,120 pistons (including the pilot run) produced is calculated to be (use five decimal places in calculating the average time):

• 0.05526.

• 0.06008.

• 0.07128.

• 0.07656.

• 0.09397.

Answer 1

The correct answer is 0.07128 i.e; option C.