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Question: Learning curve, incremental unit-time learning model. Assume the same information for Northern Defense as in Exercise, except that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours. (An 85% learning curve means b = -0.234465.)
1. Calculate the total variable costs of producing 2, 3, and 4 units.
2. If you solved Exercise 10-33, compare your cost predictions in the two exercises for 2 and 4 units. Why are the predictions different? How should Northern Defense decide which model it should use?
Exercise: Learning curve, cumulative average-time learning model. Northern Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow:
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