Learning Curve (6 pts) Nello Corporation is a leading Manufacturer communication
ID: 355532 • Letter: L
Question
Learning Curve (6 pts)
Nello Corporation is a leading Manufacturer communication Towers (self-supporting towers, guyed tower, and monopoles) has a contract to produce ten towers to support communication worldwide. Suppose Nello Corps has estimated that the R&D costs will be $2,000,000. Material costs are expected to be $10,000,000. They have estimated the design and production of the first tower will require 80,000 labor hours and a 75 percent improvement curve is expected. Skilled labor cost is $100 per hour. Desired profit for all projects is 30 percent of total costs.
A. How many labor hours should the tenth tower require? (1 pt.)
( - - - ) labor hours x ( - - - ) = ( X1 ) labor hours for the 10th unit
Hints: use Table A5.1 (page 156) Learning Curves Unit Values
B. How many labor hours for the whole project of ten tower? (1 pt.)
( - - - ) labor hours x ( - - - ) = ( - - - ) total for 10 units
Hints: use Table A5.2 (page 156) Learning Curves Unit Values
C. What total price would Nello Corps ask for the project (with 75% learning curve)? (2 pts.)
Labor (X1 hrs x $100)
=
$
R&D
=
$
Material
=
$
Total
Total Project Cost
(including 30% profit)
=
=
$ X2
X2 x 1.30 profit
E. Near the end of the project Nello Corps has a request for a cost estimate for additional five towers identical to those have already produced. What price will Nello Coprts should quote them? Justify the price. (2 pts.)
15 units
=
( ) hrs for first unit x ( ) for 75% learning
=
( ) hrs
First 10 units
=
( ) x ( ) for 75% learning
=
- ( ) hrs
Difference
=
( ) hrs
Additional 4 units
=
( ) hrs x $100/hour
=
( ) $
1/2 material of 10,000,000
=
( ) $
Total direct costs
=
( ) $
1.30 profit
=
( ) $
Project Network Design (4 pts.)
A project team has started gathering information necessary to develop a project network-predecessor activities. The results of their meeting are found in the following table:
Activity
Description
Predecessor
Duration
1
Meeting
-
0 (Negligible)
2
Design
-
6
3
Procure prototype parts
1, 2
3
4
Fabricate parts
2
5
5
Assemble prototype
3,4
3
6
Laboratory test
5
2
7
Field test
6
4
8
Adjust design
7
2
9
Order stock components
8
3
10
Order custom components
8
1
11
Assemble test production unit
9,10
5
12
Test unit
11
2
13
Document results
12
2
Develop a network (by hand): (1 pts.)
Find the slack time on activity if there any in the network (1 pts)
Find the critical path (1 pts.)
Find the project duration (1 pt.)
If a project is expected to complete in 34 days with 6 days variation, what is the probability the project will complete in 40 days? (2 pts.)
In a project, the probability of a occurrence of a high-priority risk (P) is 70%. The direct and indirect costs (C) involved in the project should the risk actually occurs are $13,000 and $7,000, respectively. What is the overall risk exposure (RE)? (1 pts)
Hints: C = direct + indirect cost
Overall risk exposure formula is RE = P x C
Using these project selection criteria, please rank and select the best project and describe briefly the rationale for the selection. (2 pts)
Cost-benefit
Difficulty
Ability
Align with organization’s goal
Total score
Rank
Weight
0.45
0.25
0.2
0.10
Project A
5
6
7
6
Project B
7
5
4
6.5
Project C
8
6
8
7
Labor (X1 hrs x $100)
=
$
R&D
=
$
Material
=
$
Total
Total Project Cost
(including 30% profit)
=
=
$ X2
X2 x 1.30 profit
Explanation / Answer
PLEASE FIND BELOW ANSWER TO FIRST QUESTION ON LEARNING CURVE :
Answer to question a:
Time to design and produce first tower = 80,000 labor hours
Improvement curve ( i.e. learning curve ) = 75%
Using learning curve table , number of labour hours tenth tower would require = 30764.69 hours
Answer to question b :
Again using learning curve table, total labour hours for the whole project of ten towers = 447084.36 hours
Answer to question c :
Total labour cost ( @ $100 / hour ) = $100/hour x 447084.36 hours = $44708436 hours
R&D cost = $2,000,000
Material cost = $10,000,000
Total of above three costs = $44,708436 + $2,000,000 + $10,000,000 = $56708436
Total project cost ( including 30% profit ) = $56708436 x 1.30 = $7320966.80
Note: I do not understand why it has been mentioned that Total cost needs to be multiplied by 2. Nothing has been mentioned in the problem which will call for multiplication by 2
Answer to question e :
Using Learning curve table, total labour hours required to produce 15 units = 585523.69 hours
Therefore, additional time required for additional 5 units = 585523.69 – 447084.36 hours = 138439.33 hour
Labour cost for additional 5 units = $100 x 138439.33 = $13843933
Material cost for 5 mobile towers ( basis $10,000,000 for 10 towers ) = $5,000,000
Therefore , total direct cost = $13,843,933 + $5,000,000 = $18,843,933
Prices should Nello Corp should quote = 1.30 x $18,843,933 = $24497113
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