=+3-35 KKK Cost estimation, cumulative average-time learning curve OBJECTIVES 4, 6 Nautical Ltd, which is under contract to the navy, assembles troop deployment boats. As part of its research program it completes the assembly of the first of a new model (PT109) of deployment boats. The navy is impressed with the PT109. It requests that Nautical Ltd submit a proposal on the cost of producing another six PT109s.

Nautical Ltd reports the following cost information for the first PT109 assembled and uses a 90% cumulative average-time learning model as a basis for forecasting direct manufacturing labour-hours for the next six PT109s. (A 90% learning curve means b = –0.152004.)

120 Chapter 3: Determining how costs behave M03_HORN3377_02_LT_C03.indd 120 2/09/13 3:20 PM 1

2 3

4 5

6 7

8 9

10 11 12 A B C lsairetam tceriD 000002$