OR

OR

ur assumption clearly worh Question 9: An electronics firm has developed a new type of fire-alarm system. A first unit assembled had a material cost of 7 18.000 and took400 hours of direct labour to assemble. Labour rate is 25 per hour. This type of assembly is known to experience a learning curve effect of 80% (index of learning = 0.3219). Demonstration of this unit to potential customers resulted in an order for 20 units during the next quarter. The firm wishes to popularize this system and will therefore pass on the benefit of cost saving due to learning effect to the customers while setting the sale price. I. Determine the price to be set for the first lot of 20 units to be sold. The initial unit will not be sold, as this is required for demonstrations. The firm follows a practice of imputing a fixed overhead at 125% of direct labour cost and will set the selling price to earn a 20% gross margin on sale price. ume that a further order for a lot of 60 units was received on a contract basis from Aacu1