Figure 3-9 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.
Refer to Figure 3-9. What is the batch unit time (labor hours) to produce 2,000 units based on the cumulative average time learning curve?

Question

Quizplus · Accepted Answer

According to the 80 percent learning rate, the cumulative average time required to produce 2,000 units will be 100 hours to produce the first 1,000 units and 60 hours to produce the second 1,000 units, with a total of 160 hours. Therefore, the batch unit time to produce 2,000 units is 80 labor hours (160 hours/2,000 units).

Figure 3-9 Hereford Company Is Planning to Introduce a New