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A company is developing a new product. During its expected life, 1 6 , 0 0 0 units of the product will be sold for
A company is developing a new product. During its expected life, units of the product will be sold for Batches $ per unit.
Production will be in batches of units throughout the life of the product. The direct labour cost is expected to reduce due to the effects of learning for the first eight batches produced. Thereafter, the direct labour cost will remain constant at the same cost per batch as the eighth batch. The direct labour cost of the first batch of units is expected to be $ and a per cent learning effect is expected to occur. The direct material and other nonlabour related variable costs will be $ per unit throughout the life of the product. x There are no fixed costs that are specific to the product.
aiCalculate the expected direct labour cost of the eighth batch.
Calculate the expected contribution to be earned from the product over its lifetime. The learning index for a per cent learning curve
b It is now thought that a learning effect will continue for all of the batches that will be produced. Calculate the rate of learning required to achieve a lifetime product contribution of $ assuming that a constant rate of learning applies throughout the Products life
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