Learning Curve (Appendix 1). A potential customer approaches Elliot, Inc. with a proposal to buy seven complex agricultural pumps for a total of \(\$ 2,000\). The pump is a new product, and only one unit has been produced at the request of another customer. The following cost data are available on the first pump:

The Engineering Department believes an 80 percent learning curve exists for this situation. Also, if the bid is accepted, the company will be eligible for a 3 percent quantity discount on direct materials.
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Estimate the incremental profit or loss Elliot, Inc. would realize if it accepted the proposal for the seven pumps.

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Direct materials (15 pounds at $2 per pound) Direct labor (50 hours at $10 per hour).... Variable overhead ($2 per direct labor hour) Fixed overhead ($1 per direct labor hour) Total cost $ 30 500 100 50 $ 680