Requirements

Calculate the total variable costs of producing $2,3,$ and $4$ units assuming that

Global Defense uses an $85\%$ incremental unit$-$time learning model as a basis for predicting

direct manufacturing labor$-$hours.

Compare the cost predictions from requirement $1($incremental unit$-$time learning model$)$ with

the cost predictions of producing $2$ and $4$ units based on a cumulative average$-$time learning

model. Why are the predictions different? How should Global Defense decide which model it

should use?

Cumulative average$-$time learning model's cumulative average time per unit and cumulative

total time and total variable cost predictions of producing $2$ and $4$ units:

Data table

Direct materials cost

$$80,000$ per unit of RS$-32$

Direct manufacturing labor time for first unit

$3,700$ direct manufacturing labor$-$hours

Learning curve for manufacturing labor time per radar system

$85\%$ incremental unit$-$t$$me ${?}^a$

Direct manufacturing labor costs

$20$ per direct manufacturing labor$-$hour

Variable manufacturing overhead costs

$

$11$ per direct manufacturing labor$-$hour

${?}^a$ Using the formula for an $85\%$ learning curve, $b=\frac{ln0\mathrm{.}85}{ln2}=\frac{-0\mathrm{.}162519}{0\mathrm{.}693147}=-0\mathrm{.}234465$