A new type of lithium-ion motorcycle battery has been created by Power Corporation for motorcycles. The first battery is expected to take 35 minutes to create, but the company anticipates an 85 percent learning curve for the first eight units. Labor costs $80 per hour on average. Materials and other variable overheads are estimated to cost $40 per unit. The company will price each battery by adding a 55 percent mark-up to the total variable costs per cell, with labor expenses based on the average time to create the last four batteries. Requirements C, D, and E are covered by the following information. The lithium-ion battery's initial phase of production has now been finished. The first unit took 40 minutes to complete, and the first eight units took an average of 15.77 minutes to complete, indicating that the learning effect had ended. The price will be adjusted by Lith00123 to reflect the real average time it took to complete the last four units.

Calculate the price Lith00123 expects to charge for its new lithium-ion battery using the cumulative-average time model (the price for labor per battery is based on the average time it takes to produce the last four units).

Estimated average time to produce 8 units = 35 minutes x 0.853 = 30 min x 0.55 = 16.55 minutes. Estimated average time to produce 4 units = 30 minutes x 0. 853 = 30 min x 0.64 = 19.2 minutes

Total time to produce 8 units = 16.55 8 units = 132.4 minutes Less: Total time to produce 4 units = 19.2 4 units = 76.80 minutes Total time to produce the 5th, 6th, 7th and 8th units = 46.08 minutes

Average time per unit to produce the last four units: 46.08 minutes 4 units = 11.52 minutes DL cost = 11.52 minutes average time for the last four units 60 minutes per hour

= 0.192 x $75 per hour labor cost

= estimated $14.40 labor cost per battery

Price to charge:

DM and other VC = $40.00 per unit Plus: DL cost = $14.40 per unit Total VC = $54.40 per unit 55% markup on VC = 1.55

The expected price for a battery = $85.25 per battery.

I WANT TO KNOW HOW DID THEY GET THIS ANSWER