Question:

Discuss the managerial implications of using Learning Curve models for the pacific boat company.

10-29 Cost estimation, cumulative average-time learning curve. The Pacific Boat Com- pany, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Pacific Boat submit a proposal on the cost of producing another six PT109. Pacific Boat reports the following cost information for the first PT109 assembled and uses a 90% cumulative average-time learning model as a basis for forecasting direct manufacturing labour-hours for the next six PT109. (A 90% learning curve means b = -0.152004.) Frisert Home Page Layout FOTOS Data Review Direct material cost Direct manufacturing labour time for first boat Direct manufacturing labour rate Variable manufacturing overhead cost Other manufacturing overhead Tooling costs Learning curve for manufacturing labour time per boat $199,000 14,700 labour hours S 42 per direct manufacturing labour-hour $ 26 per direct manufacturing labour-hour 20% of direct manufacturing labour costs $279,000 90% cumulative average time aTooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat. PUsing the formula (Appendix 10B) for a 90% learning curve, b In 0.9 In 2 --0.105361 0.693147 = -0.152004