Jack Simpson, contract negotiator for Nebula Airframe Company, is currently invo
ID: 391571 • Letter: J
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 3,000 labor hours, the second took 2,250 labor hours, and the third took 2,120 hours. Use Exhibit 6.5.
In a contract for three more units, how many labor hours should Simpson plan for? (Round your answer to the nearest whole number.)
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 3,000 labor hours, the second took 2,250 labor hours, and the third took 2,120 hours. Use Exhibit 6.5.
Explanation / Answer
Time taken to produce the first unit = 3000 hours
Time taken to produce the second unit = 2250 hours
Learning rate = (2250 / 3000) * 100
= 75%
Now,
The cumulative improvement factor for 6 units at 75% learning rate = 3.934
The cumulative improvement factor for 3 units at 75% learning rate = 2.384
To calculate the number of labor hours that would be needed to produce the next three units, we simply find the difference between the above cumulative improvement factors and multiply the result by the time taken to produce the first unit, i.e. 3000 hours
Number of labor hours for the next 3 units = (3.934 - 2.384) * 3000
= 4650 hours
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