Problem 6-5 Jack Simpson, contract negotiator for Nebula Airframe Company, is cu

Question

Problem 6-5 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 2,500 labor hours, the second took 2,000 labor hours, and the third took 1,880 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.) Number of labor hours

Explanation / Answer

This is a question in which learning curve concept has to be used. The following formula will be used in finding out the correct answer.

Y = aXb

where,

Yx = time required for xth unit
X = total number of units produced.
a = time needed to produce the first unit.
b = log of the learning rate/log of 2.

Learning rate = Time taken to produce second unit / Time taken to produce first unit

= 2000 / 2500 = 0.8 or 80%

b = log(0.8) / log(2) = -0.322

a = 2500 hours

Y4 = 2500 * 4-0.322 = 1599.84 hours

Y5 = 2500 * 5-0.322 = 1488.92 hours

Y6 = 2500 * 6-0.322 = 1404.02 hours

Thus the total additional time that simpson would need to plan for is the sum of the time taken to produce the 4th, 5th and 6th units.

= 1599.84 + 1488.92 + 1404.02

=4492.78 hours

= 4493 hours

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