Andrews & Henderson Inc.is a manufacturer of mining equipment in Colorado.Eric Andrews, the founder of the corporation, has just won a new contract from Shakley Inc.to build seven new tunneling machines for a price of $500,000 each.The machines are to be delivered in the next seven months.The costs associated with the production of the first machine are listed below.Eric estimates that an 85% cumulative average learning rate exists for these types of projects.
Following is the cost information for the first tunneling machine: Required:
(1) Prepare an estimate of the total hours for producing the second through eighth machines.
(2) Determine the expected profit from this project.

Question

Andrews & Henderson Inc.is a manufacturer of mining equipment in Colorado.Eric Andrews, the founder of the corporation, has just won a new contract from Shakley Inc.to build seven new tunneling machines for a price of $500,000 each.The machines are to be delivered in the next seven months.The costs associated with the production of the first machine are listed below.Eric estimates that an 85% cumulative average learning rate exists for these types of projects.
Following is the cost information for the first tunneling machine:  Required:
(1) Prepare an estimate of the total hours for producing the second through eighth machines.
(2) Determine the expected profit from this project.

Quizplus · Accepted Answer

The Answer of Andrews & Henderson Inc.is a manufacturer of mining equipment in Colorado.Eric Andrews, the founder of the corporation, has just won a new contract from Shakley Inc.to build seven new tunneling machines for a price of $500,000 each.The machines are to be delivered in the next seven months.The costs associated with the production of the first machine are listed below.Eric estimates that an 85% cumulative average learning rate exists for these types of projects.
Following is the cost information for the first tunneling machine:  Required:
(1) Prepare an estimate of the total hours for producing the second through eighth machines.
(2) Determine the expected profit from this project.