Dan Paramesh of Hugo Optical Equipment Company is developing a production plan for the assembly of special survey equipment for offshore oil exploration. The contract calls for the following shipping schedule:

The first survey equipment was assembled in 755 standard hours. In the past, for similar products, Hugo has experienced learning curve rates in the range of 95 to 70 percent. The expected learning rate for this contract is 95 percent. Better learning rates may be achieved with additional training and investment in automation.
Find the number of workers needed for each month for learning rates of 95, 90, 85, 80, 75, and 70 percent. Compute the total labor cost for each learning rate. Compute the labor cost savings for each 5 percent improvement in the learning rate.
What learning rate should Dan try to achieve? Explain.
Each worker works 180 hours per month for $15 per hour.

Hints 1. The cumulative total labor hours LY,, can be approximated with the following formula:

2. With Lotus 1-2-3, use the Data Table 1 command to find and display the labor cost for the various learning rates. With Excel select the Table command from the Data menu to build a two-input data table.

Transcribed Image Text:

MONTH SHIPPING SCHEDULE 1 100 234567 150 175 200 250 250 250 1,375