62 section OPERATIONS STRATEGY AND MANAGING CHANGE a. Based on past experience, what is the learning rate? . What bid should LTI submit for the total order of 100 units, assuming that learning continues? c. What is the cost expected to be for the last unit under the learning rate you estimated? 7. 4710 hours. 7 Jack Simpson, contract negotiator for NebulaAirframe Company, is currently involved in bid- ding on a follow-up government contract. In gathering cost data from the first three units, which Nebula produced under a research and development contract, he found that the first unit took 2,000 labor hours, the second took 1,800 labor hours, and the third took 1,692 hours. In a contract for three more units, how many labor hours should Simpson plan for? 8. Learning rate = 70%; unreasonable 8 Honda Motor Company has discovered a problem in the exhaust system of one of its auto- to ask for 45 hours. After 25, average mobile lines and has voluntarily agreed to make the necessary modifications to conform with repetitions time is about 3 hours. government safety requirements. Standard procedure is for the firm to pay a flat fee to deal- ers for each modification completed. Honda is trying to establish a fair amount of compensation to pay dealers and has decided to choose a number of randomly selected mechanics and observe their performance and learning rate. Analysis demonstrated that the average learning rate was 90 percent, and Honda then decided to pay a $60 fee for each repair (3 hoursx $20 per flat-rate hour). Southwest Honda, Inc., has complained to Honda Motor Company about the fee. Six mechanics, working independently, have completed two modifications each. All took 9 hours on the average to do the first unit and 6.3 hours to do the second. Southwest refuses to do any more unless Honda allows at least 4.5 hours. The dealership expects to perform the modifi- cation to approximately 300 vehicles. What is your opinion of Honda's allowed rate and the mechanics' performance? 9. a Cost of 22nd unit = $3273240. 9 United Research Associates (URA) had received a contract to produce two units of a new b. 1,886 hours. cruise missile guidance control. The first unit took 4,000 hours to complete and cost $30,000 in materials and equipment usage. The second took 3,200 hours and cost $21,000 in materi- c. Average cost = $43.126.50. als and equipment usage. Labor cost is charged at $18 per hour. The prime contractor has now approached URA and asked to submit a bid for the cost of producing another 20 guidance controls a. What will the last unit cost to build? . What will be the average time for the 20 missile guidance controls? c. What will the average cost be for guidance control for the 20 in the contract? 10. a. If first unit is 100 minutes, the 0 United Assembly Products (UAP) has a personnel screening process for job applicants to test learning rate needs to be 75%, their ability to perform at the department's long-term average rate. UAP has asked you to not 80% (80/100). Do not hire. modify the test by incorporating learning theory. From the company's data, you discovered that if people can perform a given task in 30 minutes or less on the 20th unit, they achieve b. See ISM. the group long-run average. Obviously, all job applicants cannot be subjected to 20 perfor- mances of such a task, so you are to determine whether they will likely achieve the desired rate based on only 2 performances. a. Suppose a person took 100 minutes on the first unit and 80 minutes on the second. Should this person be hired? b. What procedure might you establish for hiring (i.e., how to evaluate the job applicant's two performances)? c. What is a significant limitation of this analysis? 11. a. 3rd = 351 hrs. 11 A potentially large customer offered to subcontract assembly work that is profitable only if b. Average = 7.9hrs. each; well you can perform the operations at an average time of less than 20 hours each. The contract is worth it for 1,000 units. You run a test and do the first one in 50 hours and the second one in 40 hours. 7. How long would you expect the third one to take? b. Would you take the contract? Explain. 12. 11th 2.4476/.9 =$27196 million 12 Western Turbine, Inc., has just completed the production of the 10th unit of a new high- 12th 2.3953/ 9 = efficiency turbine/generator. Its analysis showed that a learning rate of 85 percent existed $2.6615 million over the production of the 10 units. If the 10th unit contained labor costs of $2.5 million, what price should Western Turbine charge for labor on the units II and 12 to make a profit of 10 per- $5-3811 million total cent of the selling price? 13. a. 42.165 minutes. 13 FESAuto has recently hired Meg the mechanic to specialize in front-end alignments.Although b. 35-56 minutes. she is a trained auto mechanic, she has not used FES's brand of equipment before taking this job. The standard time allocated for a front-end alignment is 30 minutes. Her first front-end alignment took 50 minutes and her second 47.5 minutes. 4. What is the expected time for Meg's 10th front-end alignment