Pohlman Company makes aircraft engines. Pohlman has noticed that, in general, each new engine design is subject to an 80 percent learning rate. Assume that the first unit produced takes 500 hours, and direct labor is paid an average of $30 per hour.
Required:
1. Set up a table with columns showing: the cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours. Show results by row for total production of: one engine, two engines, four engines, eight engines, sixteen engines, and thirty two engines.
2. What is the total labor cost if Pohlman manufactures the following number of engines: one, four, or sixteen? What is the average cost per engine for the following number of engines: one, four, or sixteen?
3. What if Pohlman is preparing a bid to build 16 engines? Calculate budgeted labor cost for an engine design which Pohlman has built before (assume that 16 of these engines had been made previously and the first unit took 500 hours). Calculate budgeted labor cost for a new engine design that Pohlman’s workers have never made before (assume the first unit will take 500 hours).