Wonder Company is planning to introduce a new product with an 80 percent incremental unit-time learning curve 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 (labor hours) to produce 2,000 units?
A) 180 hours
B) 160 hours
C) 100 hours
D) 80 hours

Question

Quizplus · Accepted Answer

The learning curve effect implies that as production doubles, the time per unit decreases by a certain percentage. With an 80% learning curve, the time for the second batch is 80% of the first batch. The first batch takes 100 hours, so the second batch takes 80 hours. The cumulative total time for 2,000 units (two batches) is 100 + 80 = 180 hours.

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