Question

ome / My courses / 2019 1A, FIN Finance for Engineers 100 100 in 2010 / Wook 2 102032010 Woor Care2.0a Horventer and into The costs of manufacturing hormonal fixed kunt barcode scanners are as follows: Cost Elements Cost Rate Direct labor $25 per hour Material $380 per unit Overhead costs 50% of direct labor The production has a 79% learning curve applied to labor required, and the time to complete the 40 direct labor hours. Determine the unit selling price based on the estimated time to complete if the company wants to make a profit equal to 20% of the total manufacturing costs (use the producing the 100th unit). "7 in F B I Do = % 5

Answer 1

Learning rate equation is -

T_n=T₁n^b

where,
n = the unit number
T₁ = direct labor hours to produce first unit = 40
T_n = direct labor hours to produce nth unit
p = the learning rate = 0.79
b = In p / ln 2 = ln 0.79 / ln 2

Hence, T₁₀₀=T₁100^b = 40*100^{(ln 0.79 / ln 2)} = 8.354 direct labor hours

Hence, For 100th unit, 8.354 direct labor hours are required

Total Cost = Direct Labor Cost + Material Cost + Overhead cost

= 8.354*25 + 380 + 0.50(8.354*25) = $693.28

Profit Required = 20%

Hence Selling Price = Total Cost*(1+0.20 ) = 693.28(1+0.20) = $831.94