QUESTION 3 - LEARNING CURVE 25 MARKS Pauline Designs is a company that manufactures sofas. A wholesaler, ActiveHome plc has approached them to provide 400 sofa sets. The sets must include a three-seater, a love seat and a single seater. The wholesaler has asked Pauline Designs to submit their tender for this proposal. The material required for production will include wood, screws etc. The estimated cost for the material for 20 sets is $5,750. According to the specifications of the order, Pauline Designs have concluded that it will take 35 hours to craft out each sofa set. $80% learning curve will apply for further production. Once the 100th set is produced, the learning rate will cease. The time taken for the 100th set will apply to the remaining production. Labour is available at $12 per hour. The company usually works 50,000 hours per annum. The company utilizes the high low method to analyse the overheads. Overheads are accounted for on the basis of hours worked. Below are the overhead costs for the past four months. Note: at the learning rate of (90%), the learning factor (b) would be -0.1520 Required: (a) As a manager of Pauline Designs, calculate the total cost of the project to prepare the tender. (18 marks) (b) With a learning rate of 90%, determine the production time for the second sofa set. (5 marks) (c) Identify two potential limitations of the learning curve concept. (2 marks)