Jack Simpson, contract negotiator for Nebula Airframe Company, is currently invo

Question

Jack Simpson, contract negotiator for Nebula Airframe Company, is currently involved in bidding on a follow-up government contract. In gathering cost data from the first three units, which Nebula produced under a research and development contract, he found that the first unit took 2,000 labor hours, the second took 1,600 labor hours, and the third took 1,500 hours.

Use Exhibit 6.5. http://lectures.mhhe.com/connect/0077535111/exhibit_6.5.jpg

In a contract for three more units, how many labor hours should Simpson plan for? (Round your answer to the nearest whole number.)

Number of Labor Hours?

Explanation / Answer

First unit took 2000 labour hours

second have taken 1600 hours

Both 2 units have taken = 3600 hours

so Improvement factor = 3600/2000 = 1.80

so Learning rate = 80%

Time taken by 3 units = 3600 + 1500 = 5100 Hours

improvement actor = 5100/2000 = 2.55

It is in between 80% to 85%

so we take it as 80% .

Now we have three more units.

so total number of units = 6

Cumulative improvement factor for n = 6 units = 4.299 or say 4.3

so total time taken by 6 units = 4.3 * 2000 = 8600 Hours

so next three units will be allotted time by simpson = 8600 - 5100 = 3500 Hours

so Number of labour hours = 3500 hours

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