1. Barnes Company estimated the cost function for its maintenance cost. The cost function has a variable element and step fixed element that increases by $10,000 for each additional 20,000 units of output between 40,000 and 80,000 units of output. Total maintenance cost would be $130,000 at 40,000 units of output and $180,000 at 60,000 units of output.

The variable cost per unit of output in this cost function is $____________

2. Addison Construction Company has begun paving roads for the Illinois highway system. Each paving project is similar. Recently, the company completed its first paving project in 20,000 hours. Direct labor is paid $20 per hour. The company needs to predict its direct labor cost for purposes of making a competitive bid on a contract for three additional paving projects. Addisons experience indicates that a 90% learning curve is appropriate for these projects.

a.NOT using a learning curve model, compute the predicted direct labor cost for the contract of three additional paving projects. $___________________.

b. Using the cumulative average-time learning model, compute the predicted direct labor

cost for the contract of three additional paving projects. $___________________.

3. Each time Candy Co. hires a new employee, it must wait for some period of time before the employee can meet production standards. Management is unsure of the learning curve in its operations but it knows the first job by a new employee averages 30 hours and the second job averages 18 hours. Assume all jobs to be equal in size.

Required:

What is the learning-curve percentage, assuming the cumulative average-time method?

____________%

What is the time for a new employee to build 16 units with this learning curve using the cumulative average-time method?

___________hours