Operations and Supply Chain Management 14th Edition by Robert Jacobs,Richard Chase

Exercise 6

Lazer Technologies Inc. (LTI) has produced a total of 20 high-power laser systems that could be used to destroy any approaching enemy missiles or aircraft. The 20 units have been produced, funded in part as private research within the research and development arm of LTI, but the bulk of the funding came from a contract with the U.S. Department of Defense (DoD).
Testing of the laser units has shown that they are effective defense weapons, and through redesign to add portability and easier fi eld maintenance, the units could be truck-mounted.
DoD has asked LTI to submit a bid for 100 units.
The 20 units that LTI has built so far cost the following amounts and are listed in the order in which they were produced:

a. Based on past experience, what is the learning rate?
b. What bid should LTI submit for the total order of 100 units, assuming that learning continues?
c. What is the cost expected to be for the last unit under the learning rate you estimated?