It took MegaTech, Inc., 100,000 labor-hours to produce the first of several oil-drilling rigs for Antarctic exploration.

Your company, Natural Resources, Inc., has agreed to purchase the fifth (steady state) oil-drilling rig from MegaTech’s manufacturing yard. Assume that MegaTech experiences a learning rate of 80%. At a labor rate of $35 per hour, what should you, as the purchasing agent, expect to pay for the fifth unit?

The simplified formula for calculating learning rate time using the table coefficients is given as:

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TN = TC where Ty = Time needed to produce the nth unit N T = Time needed to produce the first unit C = Learning curve coefficient