Question

Problem 6-10 United Research Associates (URA) had received a contract to produce two units of a new cruise missile guidance control. The first unit took 4,000 hours to complete and cost $40,000 in materials and equipment usage. The second took 3,600 hours and cost $32,000 in materials and equipment usage. Labor cost is charged at $20 per hour. The prime contractor has now approached URA and asked to submit a bid for the cost of producing another 20 guidance controls. Use Exhibit 6.4 and Exhibit 6.5. a. What will the last unit cost to build? (Round your answer to the nearest dollar amount.) Cost of last un b. What will be the average time for the 20 missile guidance controls? (Round your answer to the nearest whole number.) Average time hours c. What will the average cost be for guidance control for the 20 in the contract? (Round your answer to the nearest dollar amount.) Average cost

Answer 1

(a)

90% for 22nd unit	0.6251
80% for 22nd unit	0.3697

Hours in 22nd unit (0.6251*4,000)	2,500.40
Labor cost for 22nd unit (2500.4*20)	50,008
Material cost for 22nd unit (0.3697*40,000)	14,788
Total cost for 22md unit	64,796

(b)

Cumulative improvement factor @ 90% for 22 units	15.86
Hours for 22 units (4,000*15.86)	63,440
Hours for just the 20 units (63,440 - 4,000 - 3,600)	55,840
Average hours for 20 units (55,840/20)	2,792

(c)

Cumulative improvement factor @ 80% for 22 units

11.23

Average Labor cost (2,792*$20)...................................................(1)	55,840
Materials cost for 22 units (11.23*40,000)	449,200
Materials cost for just the 20 units (449,200 - 40,000 - 32,000)	377,200
Average materials cost (377,200 / 20)..........................................(2)	18,860
Average total cost ...............................................................(1) + (2)	74,700