Question
Lockheed Martin is buying a new sub-assembly from a supplier whose process normally demonstrates an 85% learning curve. The buyer placed an order for 15,000
Lockheed Martin is buying a new sub-assembly from a supplier whose process normally demonstrates an 85% learning curve. The buyer placed an order for 15,000 units and received a quote from the supplier of $629.69 per unit. The quote included the following per-unit cost and profit data:
Material $89.40
Direct labor $168.35 (7 hours on average per unit at $24.05 per hour)
Overhead $294.61 (Allocated at 175% of direct labor)
Total costs $552.36
Profit $77.33 (14% of total costs)
Price per unit $629.69
Lockheed now wants to place an order for 105,000 additional units (making the total combined order 120,000 units). Lockheeds buyer estimates that material costs will decrease by 6% due to larger volumes. How much should Lockheed expect to pay per unit for the second order given the expected benefit of the learning curve and the reduction in material costs due to higher volumes? You must show all work to receive any credit.
New Unit Price:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started