A company in Sussex has developed a small motorised craft, the Deluxe. Construction of the Deluxe in the companys backyard is a two man operation. Harry is paid 12.75 an hour and Edward is paid 9.60 an hour.

The time taken by the two employees to make the first boat in May was as follows:

Harry	Skilled employee	220 hours
Edward	Semi-skilled employee	410 hours

Experience has shown that where the construction of a motorised craft is concerned, the use of skilled labour is associated with an 85% learning effect and the semi-skilled labour is associated with a 90% learning effect.

During the month of July the fourth and fifth boats were assembled from start to finish.

You are required to:

1. Calculate the total budgeted time for the boats assembled in July, and total labour cost for the boats assembled in July.
2. Discuss the possible problems that could be associated with ignoring the learning curve when estimating costs.