10-41 Cost estimation, incremental unit-time learning model. The Pacific Boat Company, which is under contract to the U.S. 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 Pacific Boat submit a proposal on the cost of producing another six PT109s. Pacific Boat reports the following cost information for the first PT109 assembled and uses a 90% incremental unit-time learning model as a basis for forecasting direct manufacturing labor- hours for the next six PT109s. (A 90% learning curve means b = -0.152004.) Home Insert Page Layout Formulas A Data Review View B 1 Direct material cost $199,000 2 Direct manufacturing labor time for first boat 3 Direct manufacturing labor rate 4 Variable manufacturing overhead cost 5 Other manufacturing overhead 6 Tooling costs 7 Learning curve for manufacturing labor time per boat 8 14,700 labor hours $ 42 per direct manufacturing labor-hour $ 26 per direct manufacturing labor-hour 20% of direct manufacturing labor costs $279,000 90% cumulative average time 9 Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat. 10 In 0.9 11 Using the formula (page 391) for a 90% learning curve, b = In 2 -0.105361 0.693147 -0.152004 Required: 1. Prepare a prediction of the total costs for producing the six PT109s for the Navy. 2. Which learning curve model (cumulative average-time or incremental unit-time) should Pacific Boat use? How should it decide which learning curve model it should use?