Required information [The following information applies to the questions displayed below.] Ellington Company manufactures a line of motorbikes and dirt bikes under the trade name CrossCountry. The company has been in business for almost 20 years and has malntalned a profitable share of the recreational vehicle market due to its reputation for high-quality products. In additlon, Ellington's engineering department has kept the company In the forefront by Incorporating the latest technology In the CrossCountry bikes. Most subassembly work for the bikes is subcontracted to rellable vendors. However, the final assembly and inspection of all products is performed at Ellington's plant. Ellington recently developed a new brakIng system for the CrossCountry Model-500 dirt bike. Because of the company's current avallability of production capacity. Jim Walsh, production manager, recommended that the first lot of the new brakIng system be manufactured In-house rather than by subcontractors. This 220 -unit production run has now been completed. The cumulatlve average labor hours per unit for the braking system was 220 hours. Ellington's experlence with similar products indicates that a learning curve of 80% is applicable and that the learning factor can be expected to extend only through the fourth production run ( 220 per batch) for a total of 880 units. Ellington's direct labor cost is $33 per direct labor hour. Its management must decide whether to continue producing the brakIng system In Its own plant or to subcontract this work. Joyce Lane, Ellington's purchasing agent, has recelved a proposal from MACQ, a company speclalizing In component assembly. MACQ has done work in the past for Ellington and has proved to be a highquality and rellable vendor. The terms of MACQ's proposal are negotlable, and before beginning discussions with them, Joyce has decided to conduct some relevant financlal analysis. Required: 1. Ellington Company has an Immedlate requirement for a total of 1,600 units of the braking system. Determine the company's future direct labor costs to produce the required braking system units if It manufactures the units in-house. 2. A consultant has advised Joyce that the learning rate for this application might be closer to 75%. What is the effect on projected costs of using a 75% learning rate as opposed to an 80% learning rate? (Do not round intermedlate calculations.)