Green Company is planning to introduce a new product with a 75 percent incremental unit-time learning curve for production in batches of 1,500 units. The variable labor costs are $55 per unit for the first 1,500-unit batch. Each batch requires 200 hours. There are $15,000 in fixed costs not subject to learning. What is the cumulative total time (labor hours) to produce 3,000 units

Question

Kyler Vazquez

Business

19 September, 16:48

Green Company is planning to introduce a new product with a 75 percent incremental unit-time learning curve for production in batches of 1,500 units. The variable labor costs are $55 per unit for the first 1,500-unit batch. Each batch requires 200 hours. There are $15,000 in fixed costs not subject to learning. What is the cumulative total time (labor hours) to produce 3,000 units

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Bird · Answer 1

210 hours

Explanation:

The learning curve rate can be found by log75%

Ln0.75 = 0.12249

1 batch requires 200 hours

The 1500 units batch will require 200 hours

For 3000 units there will be two batches of 1500 units each

200 hours * 2 batches * 0.12249 * 4.5 = 210 hours