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 cumulative average time per batch using the incremental unit-time learning curve for 2,000 units?

Question

Quizplus · Accepted Answer

Using the incremental unit-time learning curve and an 80% learning rate for 2,000 units, we can calculate the cumulative average time per batch as follows:

For the first 1,000 units:
Cumulative average time per batch = 100 hours * (1 / (1^0.322)) = 100 hours

For the next 1,000 units:
Cumulative average time per batch = 100 hours * (2 / (2^0.322)) = 89.68 hours

So the overall cumulative average time per batch for 2,000 units would be the total time divided by the total number of batches, which is:
(100 hours + 89.68 hours) / 2 = 94.84 hours

Rounding to the nearest whole number, we get the answer of 90 hours (option C).

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