g jolsan Technologies had received a contract to produce two units of a new cruise missile guidance control. The first unit took 5,000 hours to complete and cost $30,000 in materials and equipment usage. The second took 4,500 hours and cost $24,000 in materials and equipment usage. Labor cost is charged at $25 per hour. The prime contractor has now approached Jolsan Technologies and asked to submit a bid for the cost of producing another 20 guidance controls. Use Exhibit 6.4 and Exhibit 6.5. What will the last unit cost to build

Total cost to build the last unit = $89,227.92

Explanation:

Focus on time required to build 22nd unit (2 new unit + 20 existing unit guidance control)

Learning rate for labour hours = Time for the second unit / Time for the first unit

Learning rate for labour hours = 4500 hours /5000 hours

Learning rate for labour hours = 0.90

Learning rate for material and equipment usage  = Material and equipment cost for the second item / Material and equipment cost for the first item

Learning rate for material and equipment usage  = $24.000 / $30,000

Learning rate for material and equipment usage  = 0.80

Using learning curve table, the time required to build 22nd unit = 3,125.49 hours. Using learning curve table, the material and equipment cost to build 22nd unit = $11,090.67

Labour cost to build 22nd unit at $25 per hour = $25 * $3125.49 = $78,137.25

Hence, the total cost to build the last unit = Labour cost + Material and equipment cost

Total cost to build the last unit = $78,137.25 + $11,090.67

Total cost to build the last unit = $89,227.92

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