The Open Waters Company, 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 Open Waters submit a proposal on the cost of producing another six PT109s. Open Waters 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 labor-hours for the next six PT109. (A 90% learning curve means b = -0.152004.) E: (Click the icon to view the cost information.) Read the requirements. Requirements Data table Direct materials cost 1. Calculate predicted total costs of producing the six PT109s for the Navy. (Open Waters will keep the first deployment boat assembled, costed at $1,545,000, as a demonstration model for potential customers.) 2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109s in requirement 1, and (b) the predicted total costs for producing the six PT109s, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturing labor-hours. Direct manufacturing labor time for first boat Learning curve for manufacturing labor time per boat Direct manufacturing labor costs Variable manufacturing overhead costs Other manufacturing overhead Tooling costs $ 197,000 per PT109 15,300 direct manufacturing labor-hours 90% cumulative average time $ 46 per direct manufacturing labor-hour $ 24 per direct manufacturing labor-hour 15% of direct manufacturing labor costs $ 277,000 1 Print Done In 0.90 - 0.105361 Using the formula for a 90% learning curve, b = = -0.152004 In 2 0.693147 2 Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat. The Open Waters Company, 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 Open Waters submit a proposal on the cost of producing another six PT109s. Open Waters 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 labor-hours for the next six PT109. (A 90% learning curve means b = -0.152004.) E: (Click the icon to view the cost information.) Read the requirements. Requirements Data table Direct materials cost 1. Calculate predicted total costs of producing the six PT109s for the Navy. (Open Waters will keep the first deployment boat assembled, costed at $1,545,000, as a demonstration model for potential customers.) 2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109s in requirement 1, and (b) the predicted total costs for producing the six PT109s, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturing labor-hours. Direct manufacturing labor time for first boat Learning curve for manufacturing labor time per boat Direct manufacturing labor costs Variable manufacturing overhead costs Other manufacturing overhead Tooling costs $ 197,000 per PT109 15,300 direct manufacturing labor-hours 90% cumulative average time $ 46 per direct manufacturing labor-hour $ 24 per direct manufacturing labor-hour 15% of direct manufacturing labor costs $ 277,000 1 Print Done In 0.90 - 0.105361 Using the formula for a 90% learning curve, b = = -0.152004 In 2 0.693147 2 Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat