Figure 23-3
Abboud Company is planning to introduce a new product with an 80 percent cumulative learning curve for production for batches of 1,000 units. The variable labour costs are £30 per unit for the first 1,000-unit batch. Each batch requires 100 hours. There are £10,000 in fixed costs not subject to learning.
-Refer to Figure 23-3. What is the cumulative total time (labour hours) to produce 2,000 units?
A)100 hours
B)80 hours
C)160 hours
D)20 hours

Question

Quizplus · Accepted Answer

Based on the 80 percent cumulative learning curve, the cumulative total time to produce 2,000 units is 160 hours. This is calculated by doubling the time for a single batch (100 hours) and then multiplying by the learning curve factor (0.8): 
2,000 units = 2 batches of 1,000 units
2 batches = 2 x 100 hours/batch = 200 hours
Cumulative total time = 200 hours x 0.8 = 160 hours.

Figure 23-3 Abboud Company Is Planning to Introduce a New Product with Product