Consider the preparation of income tax statements. The process starts with an initial cost c (1) = 45 and a learning rate of LR = 0.95, and by now has reached a cumulative output of 100. Using the LCC method, what unit costs do you expect for the 100th unit?

Question

Horn

Business

2 November, 09:40

Consider the preparation of income tax statements. The process starts with an initial cost c (1) = 45 and a learning rate of LR = 0.95, and by now has reached a cumulative output of 100. Using the LCC method, what unit costs do you expect for the 100th unit?

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Answers (1)

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Lorenzo Stuart · Answer 1

The unit cost will be $32

Explanation:

The formula is given as

Cn = C * n^ (b)

Where,

Cn = Unit cost at nth unit = 100th

C = unit cost of first unit = $45

n = unit = 100

b = learning curve = log (LR) / log2 = log (0.95) / log2 = - 0.074

Cn = 45 * 100^ (-0.074) = $32