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The labor cost to produce a certain item is $21.00 per hour. Job setup costs $500 and material costs are $30 per unit. The item can be purchased for $200.00 per unit. The learning rate is 80 percent. Overhead is charged at a rate of 25 percent of labor, materials, and setup costs.
a. Determine the total production cost if 25 units need to be produced, given that the first unit took 8 hours to complete.
b. What is the minimum production quantity (n) necessary to make production cost less than purchase cost?
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