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3. Grogan Ltd. produce hand-made shoes for the retail market. They have just designed a new style of shoe called the Toastitoe' and it took
3. Grogan Ltd. produce hand-made shoes for the retail market. They have just designed a new style of shoe called the Toastitoe' and it took their shoe-makers 3.6 hours of direct labour to make the first shoe. Grogan Ltd. believe that an 80% cumulative average- time learning model applies to their shoe-makers. The direct labour cost for the shoe- makers is 32.50 per hour. The natural log of 0.8 is -0.2231 and the natural log of 2 is 0.6931. You should make all calculations to 3 decimal places. Required; a) What will be the total direct labour cost to produce eight pairs of 'Toastitoes'? (7 marks) b) Recalculate your answer to part (a) assuming that the shoe-makers have an 80% incremental unit-time learning rate. (14 marks) c) What does the empirical research evidence tell us about the efficiency gains that companies can make from learning and experience? (12 marks)
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