Bachmann Products, Inc., has found that new products follow a learning curve. The first two units have been completed with the following results: Units Produced Marginal Labor Time 1 80.00 2 68.00 How much time will be needed to complete the 4th unit?

a. 74.00 hours.

b. 57.80 hours.

c. 56.00 hours.

d. 54.40 hours

Time needed to complete the 4th unit = 57.80 hours

Explanation:

The learning curve theory states that as the cumulative output doubles the cumulative average time taken till date is reduced to a certain percentage of the previous time. This percentage is called learning rate

Total time = Average time * cumulative number of units

The cumulative average time is determined using the formula below:

Y = aX^b

a - time taken for the first unit produced

b = log LR/Log 2

X - cumulative units till date

Y - cumulative average time taken for X units

LR - Learning rate

LR = 68/80 = 0.85 = 85%

Time needed to complete the 4th unit

= Learning rate * time take for the 2 unit

= 85% * 68

= 57.80 hours

Time needed to complete the 4th unit = 57.80 hours