Assume that General Dynamics, which manufactures high-technology instruments for spacecraft, is considering the sale of a navigational unit to a government agency in India that wishes to launch its own communications satellite. The government agency plans to purchase 8 units, although it would also consider buying 16 units. General Dynamics has started a chart relating labor time required to units produced.
Time Required to
Unit Produced (X) Produce the X th Unit
1 . . . . . . . . . . . . . . . . . . . . . . . . 10,000 hours
2 . . . . . . . . . . . . . . . . . . . . . . . . 8,000 hours
4 . . . . . . . . . . . . . . . . . . . . . . . . 6,400 hours
8 . . . . . . . . . . . . . . . . . . . . . . . . ?
16 . . . . . . . . . . . . . . . . . . . . . . . . ?
Required
a. Complete the chart by filling in the labor time required to produce 8 and 16 units.
b. Assume that labor time costs $125 per hour. Compare the cost of producing the first unit to the cost of producing the 16th unit. What is the percentage of the cost of the 16th unit to the cost of the first unit?