ENGINEERING ECONOMICS

CLO $2$

Marks $25$

An electronics manufacturing company is planning to introduce a new product in the market. The best competitor sells a similar product at $$\frac{420}{?}$ unit. Other pertinent data are as follows:

Direct labor cost: $$\frac{15\mathrm{.}00}{?}$ hour

Factory overhead: $120\%$ of direct labor

Production materials: $$\frac{300}{?}$ unit

Packaging costs: $20\%$ of direct labor

It has been found that an $85\%$ learning curve applies to the labor required. The time to complete the first unit has been estimated to be $5\mathrm{.}26$ hours. The company decides to use the time required to complete the $20$th unit as a standard for cost estimation purposes. The profit margin is based on the total manufacturing costs.

$($a$)$ Using the information given, calculate the maximum profit margin that the company can have so as to remain competitive.

$($b$)$ If the company desires a profit margin of $15\%,$ what would be the target production cost and can it be achieved under given conditions?

$Z_u=K(u^n)n=log\frac{s}{log2}$