Question
Boing Airplane Company has built a new model jet aircraft, which it intends to sell to high net worth clients. This aircraft required 25,000 hours
Boing Airplane Company has built a new model jet aircraft, which it intends to sell to high net worth clients. This aircraft required 25,000 hours to complete. Eagle believes an incremental unit-time learning model best reflects the company's production efficiency.
Boing's manufacturing costs for the second aircraft are presented below.
|
| ||
Direct labor | $ | 140.00 | per direct labor hour |
Variable overhead |
| 120.00 | per direct labor hour |
Fixed overhead |
| 200000.00 | per unit |
Materials |
| 90000.00 | per unit |
Boing just received a contract to make three more identical aircraft (a total of four were made). Total labor cost for the second unit was $2,870,000
What is the dollar amount of the difference between the predicted total costs for producing the fourth aircraft with the learning curve and the predicted total costs for producing the fourth aircraft, assuming that there is no learning curve for direct manufacturing labor? That is, assume a linear function for units produced and direct manufacturing labor-hours.
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