Question
Carr Company produced a pilot run of forty units of a recently developed piston used in one of its products. Carr expected to produce and
Carr Company produced a pilot run of forty units of a recently developed piston used in one of its products. Carr expected to produce and sell 1,900 units annually. The pilot run required an average of 0.55 direct labor hours per piston for 40 pistons. Carr experienced an eighty percent learning curve on the direct labor hours needed to produce new pistons. Past experience indicated that learning tends to cease by the time 640 pistons are produced.
Carr's manufacturing costs for pistons are presented below.
Direct labor | $ 11.00 | per direct labor hour |
---|---|---|
Variable overhead | 10.00 | per direct labor hour |
Fixed overhead | 20.00 | per direct labor hour |
Materials | 3.00 | per unit |
Carr received a quote of $7 per unit from Truck Machine Company for the additional 1,860 needed pistons. Marshall frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Truck.
If the pistons are manufactured by Carr Company, the average direct labor hours per unit for the first 640 pistons (including the pilot run) produced is calculated to be (use five decimal places in calculating the average time):
Multiple Choice
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0.21408.
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0.24797.
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0.20926.
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0.23056.
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0.22528.
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