Learning Curve Analysis

Dallas Motor Company (DMC) is buying a new item from a supplier whose process normally demonstrates a 90% learning curve.The buyer placed an order for 10,000 units and received a quote from the supplier of $378.40 per unit.The quote included the following per-unit cost and profit data:

Material$74

Direct labor$120(6 hours on average per unit at $20 per hour)

Overhead$150(Allocated at 125% of direct labor)

Total costs$344

Profit$34.40(10% of total costs)

Price per unit$378.40

DMC now wants to place an order for 70,000 additional units.DMC's buyers estimate that material costs will decrease by 12% due to larger volumes.How much should DMC expect to pay per unit given theexpected benefit of the learning curveand thereduction in material costs due to higher volumes?