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Chapter 1: Q6_7OQ (page 143)

Johnson Industries received a contract to develop and produce four high-intensity long-distance receiver/transmitters for cellular telephones. The first took 2,000 labor hours and \(39,000 worth of purchased and manufactured parts; the second took 1,500 labor hours and \)37,050 in parts; the third took 1,450 labor hours and \(31,000 in parts, and the fourth took 1,275 labor hours and \)31,492 in parts. Johnson was asked to bid on a follow-on contract for another dozen receiver/transmitter units. Ignoring any forgetting factor effects, what should Johnson estimate time and parts costs to be for the dozen units? (Hint: There are two learning curves鈥攐ne for laborand one for parts.)

Short Answer

Expert verified

The cost and labor for 12 more units are $330,876and 11,556 hours, respectively.

Step by step solution

01

Introduction

A learning curve is a visual representation of how organizational culture has improved over time. It illustrates a significant relationship between learning time and performance displayed at work.

02

Estimating time and parts costs.

For labor, the experience of learning will be:

(Unit1)/(unit2) =1500/2000 x 100=75%

(unit2)/(unit4) =1275/1500 x 100=85%

The average of labor learning

Therefore, the average labor learning rate is 80%.

For cost, the learning experience will be:

(unit1)/(unit2) =37050/39000 x 100=95%

(unit2)/(unit4) = 31492/37050 x 100=85%

The average of cost learning:

Therefore, the average cost of learning will be 90%.

For, labor 12 more units:

16 units = 8.920

-4 units = 3.142

= 5.778

Therefore, 12 units more labor would be 2000(5.778) = 11556 hours.

For, cost 12 more units:

16 units = 12.040

-4 units = 3.556

= 8.484

Therefore, 12 units costing39000(8.484) = $330,876.

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