Hereford Company is planning to introduce a new product with an 80 percent learning rate for production for batches of 1,000 units. The variable labor 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. What is the cumulative total time using the incremental unit-time learning curve to produce 2,000 units?
A)180
B)100
C)90
D)80

Question

Quizplus · Accepted Answer

The cumulative total time to produce 2,000 units, considering an 80 percent learning rate, involves calculating the time for the first 1,000 units and then applying the learning rate to find the time for the second batch of 1,000 units. The first 1,000 units require 100 hours. The learning rate of 80% implies that each subsequent batch of 1,000 units will take 80% of the time of the previous batch. Therefore, the second batch of 1,000 units will take 80 hours (80% of 100 hours). The cumulative time for 2,000 units is the sum of the time for the first and second batches: 100 hours + 80 hours = 180 hours.

Hereford Company Is Planning to Introduce a New Product with an 80