A manufacturing company wishes to enter a new market. By the end of next year, t

Question

A manufacturing company wishes to enter a new market. By the end of next year, the market leader will have produced 16,000 units on an 80 percent learning curve, and the year- end price is expected to be $475/unit. Your manufacturing personnel tell you that the first unit will require $7,150 to produce and, with the new technology you have developed, you should be able to perform at a 75 percent learning curve. 1) How many units must you produce and sell over the next year in order to compete with the leader at $475/unit at year end? 2) Is your answer realistic, and what assumptions have you made?

Explanation / Answer

Note : Chegg does not accept the answer above 65000 characters , here unfornutaly my calculations are above 65000 characters So becuase of system issue , I am cancelling few calculations.

Given Information :

Target = 16000 units (By the end of next year ) , 80 % Learning curve ,Price = $ 7150

New Technology Developed = 75 percent learning curve

Here The present learning curve is 75.

1) Answer :

I used excel solver & found the value .

Following are the calculations.

From above calculation its clear that for 687 no of items we will get the price $ 475.

2)

This answer is approximate & most realistic. See generally in learning curve the predictions that , the cost comes down as we repeat the process methodology again & again.

Assumptions

1) Calculations are totally based on Learning curve

2) The answer generated is approximate answer , the value may change +10 or -10 ie 697 or 677

3) The target of $ 475 can be achieved at the earliest because the demand is 16000 where the defined price quantity is 687.

Learning Curve Calculator Improvement Rate--> 25% Learning Rate--> 75% Unit Number (quantity produced, pieces) Unit Cost (hrs/pc) Cum Total Cost (hrs) Cum Average Cost (hrs/pc) 1 7150.00 7150.00 7150.00 2 5362.50 12512.50 6256.25 3 4531.93 17044.43 5681.48 4 4021.88 21066.30 5266.58 5 3666.13 24732.43 4946.49 6 3398.94 28131.37 4688.56 7 3188.30 31319.67 4474.24 8 3016.41 34336.07 4292.01 9 2872.50 37208.57 4134.29 10 2749.59 39958.16 3995.82 .
452 565.36 428723.00 948.50 453 564.84 429287.84 947.66 454 564.32 429852.16 946.81 455 563.81 430415.97 945.97 456 563.30 430979.27 945.13 457 562.78 431542.05 944.29 458 562.27 432104.32 943.46 459 561.76 432666.09 942.63 460 561.26 433227.34 941.80 461 560.75 433788.09 940.97 462 560.25 434348.34 940.15 463 559.74 434908.09 939.33 464 559.24 435467.33 938.51 465 558.74 436026.07 937.69 466 558.25 436584.32 936.88 467 557.75 437142.07 936.06 468 557.25 437699.32 935.25 469 556.76 438256.09 934.45 470 556.27 438812.35 933.64 471 555.78 439368.13 932.84 472 555.29 439923.42 932.04 473 554.80 440478.23 931.24 474 554.32 441032.54 930.45 475 553.83 441586.37 929.66 476 553.35 442139.72 928.86 477 552.87 442692.59 928.08 478 552.39 443244.98 927.29 479 551.91 443796.88 926.51 480 551.43 444348.31 925.73 481 550.95 444899.27 924.95 482 550.48 445449.75 924.17 483 550.01 445999.75 923.39 484 549.53 446549.29 922.62 485 549.06 447098.35 921.85 486 548.59 447646.94 921.08 487 548.13 448195.07 920.32 488 547.66 448742.73 919.55 489 547.19 449289.93 918.79 490 546.73 449836.66 918.03 491 546.27 450382.93 917.28 492 545.81 450928.73 916.52 493 545.35 451474.08 915.77 494 544.89 452018.97 915.02 495 544.43 452563.40 914.27 496 543.98 453107.38 913.52 497 543.52 453650.90 912.78 498 543.07 454193.97 912.04 499 542.62 454736.59 911.30 500 542.17 455278.75 910.56 501 541.72 455820.47 909.82 502 541.27 456361.74 909.09 503 540.82 456902.56 908.35 504 540.38 457442.93 907.62 505 539.93 457982.87 906.90 506 539.49 458522.35 906.17 507 539.05 459061.40 905.45 508 538.61 459600.01 904.72 509 538.17 460138.17 904.00 510 537.73 460675.90 903.29 511 537.29 461213.19 902.57 512 536.86 461750.05 901.86 513 536.42 462286.47 901.14 514 535.99 462822.46 900.43 515 535.56 463358.01 899.72 516 535.12 463893.14 899.02 517 534.69 464427.83 898.31 518 534.27 464962.10 897.61 519 533.84 465495.94 896.91 520 533.41 466029.35 896.21 521 532.99 466562.33 895.51 522 532.56 467094.90 894.82 523 532.14 467627.04 894.12 524 531.72 468158.76 893.43 525 531.30 468690.05 892.74 526 530.88 469220.93 892.06 527 530.46 469751.39 891.37 528 530.04 470281.43 890.68 529 529.63 470811.06 890.00 530 529.21 471340.27 889.32 531 528.80 471869.07 888.64 532 528.39 472397.46 887.97 533 527.97 472925.43 887.29 534 527.56 473452.99 886.62 535 527.15 473980.14 885.94 536 526.74 474506.89 885.27 537 526.34 475033.23 884.61 538 525.93 475559.16 883.94 539 525.53 476084.68 883.27 540 525.12 476609.81 882.61 541 524.72 477134.53 881.95 542 524.32 477658.84 881.29 543 523.92 478182.76 880.63 544 523.52 478706.27 879.97 545 523.12 479229.39 879.32 546 522.72 479752.11 878.67 547 522.32 480274.43 878.02 548 521.93 480796.36 877.37 549 521.53 481317.89 876.72 550 521.14 481839.03 876.07 551 520.75 482359.77 875.43 552 520.35 482880.13 874.78 553 519.96 483400.09 874.14 554 519.57 483919.66 873.50 555 519.18 484438.85 872.86 556 518.80 484957.64 872.23 557 518.41 485476.05 871.59 558 518.02 485994.08 870.96 559 517.64 486511.72 870.33 560 517.26 487028.97 869.69 561 516.87 487545.84 869.07 562 516.49 488062.34 868.44 563 516.11 488578.45 867.81 564 515.73 489094.17 867.19 565 515.35 489609.53 866.57 566 514.97 490124.50 865.94 567 514.60 490639.09 865.32 568 514.22 491153.31 864.71 569 513.84 491667.16 864.09 570 513.47 492180.63 863.47 571 513.10 492693.72 862.86 572 512.72 493206.44 862.25 573 512.35 493718.80 861.64 574 511.98 494230.78 861.03 575 511.61 494742.39 860.42 576 511.24 495253.63 859.82 577 510.87 495764.51 859.21 578 510.51 496275.02 858.61 579 510.14 496785.16 858.01 580 509.78 497294.93 857.41 581 509.41 497804.35 856.81 582 509.05 498313.39 856.21 583 508.69 498822.08 855.61 584 508.32 499330.41 855.02 585 507.96 499838.37 854.42 586 507.60 500345.97 853.83 587 507.24 500853.22 853.24 588 506.89 501360.10 852.65 589 506.53 501866.63 852.07 590 506.17 502372.80 851.48 591 505.82 502878.62 850.89 592 505.46 503384.08 850.31 593 505.11 503889.19 849.73 594 504.76 504393.95 849.15 595 504.40 504898.35 848.57 596 504.05 505402.40 847.99 597 503.70 505906.10 847.41 598 503.35 506409.45 846.84 599 503.00 506912.45 846.26 600 502.65 507415.11 845.69 601 502.31 507917.42 845.12 602 501.96 508419.38 844.55 603 501.61 508920.99 843.98 604 501.27 509422.26 843.41 605 500.93 509923.19 842.85 606 500.58 510423.77 842.28 607 500.24 510924.01 841.72 608 499.90 511423.91 841.16 609 499.56 511923.46 840.60 610 499.22 512422.68 840.04 611 498.88 512921.56 839.48 612 498.54 513420.10 838.92 613 498.20 513918.30 838.37 614 497.87 514416.17 837.81 615 497.53 514913.69 837.26 616 497.19 515410.89 836.71 617 496.86 515907.75 836.16 618 496.53 516404.27 835.61 619 496.19 516900.46 835.06 620 495.86 517396.32 834.51 621 495.53 517891.85 833.96 622 495.20 518387.05 833.42 623 494.87 518881.92 832.88 624 494.54 519376.45 832.33 625 494.21 519870.66 831.79 626 493.88 520364.54 831.25 627 493.55 520858.10 830.71 628 493.23 521351.33 830.18 629 492.90 521844.23 829.64 630 492.58 522336.81 829.11 631 492.25 522829.06 828.57 632 491.93 523320.99 828.04 633 491.61 523812.60 827.51 634 491.29 524303.88 826.98 635 490.96 524794.85 826.45 636 490.64 525285.49 825.92 637 490.32 525775.82 825.39 638 490.00 526265.82 824.87 639 489.69 526755.51 824.34 640 489.37 527244.88 823.82 641 489.05 527733.93 823.30 642 488.74 528222.66 822.78 643 488.42 528711.08 822.26 644 488.10 529199.19 821.74 645 487.79 529686.98 821.22 646 487.48 530174.46 820.70 647 487.16 530661.62 820.19 648 486.85 531148.47 819.67 649 486.54 531635.01 819.16 650 486.23 532121.24 818.65 651 485.92 532607.16 818.14 652 485.61 533092.77 817.63 653 485.30 533578.07 817.12 654 484.99 534063.07 816.61 655 484.69 534547.75 816.10 656 484.38 535032.13 815.60 657 484.07 535516.20 815.09 658 483.77 535999.97 814.59 659 483.46 536483.43 814.09 660 483.16 536966.59 813.59 661 482.85 537449.45 813.09 662 482.55 537932.00 812.59 663 482.25 538414.25 812.09 664 481.95 538896.20 811.59 665 481.65 539377.84 811.09 666 481.35 539859.19 810.60 667 481.05 540340.24 810.11 668 480.75 540820.99 809.61 669 480.45 541301.44 809.12 670 480.15 541781.59 808.63 671 479.86 542261.45 808.14 672 479.56 542741.00 807.65 673 479.26 543220.27 807.16 674 478.97 543699.23 806.68 675 478.67 544177.91 806.19 676 478.38 544656.29 805.70 677 478.09 545134.37 805.22 678 477.79 545612.16 804.74 679 477.50 546089.67 804.26 680 477.21 546566.87 803.77 681 476.92 547043.79 803.29 682 476.63 547520.42 802.82 683 476.34 547996.76 802.34 684 476.05 548472.81 801.86 685 475.76 548948.57 801.38 686 475.47 549424.04 800.91 687 475.18 549899.22 800.44

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