The Pacific Boat Company, which is under contract to the U.S. Navy, assembles troop deployment boats. (Click the icon to view the additional information.) More info 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 PT109s. Pacific Boat reports the following cost information for the first PT109 assembled. Requirement 1. Prepare a prediction of the total costs for producing the six PT109s for the Navy. Requirements the neares Data table Print Done 1. Prepare a prediction of the total costs for producing the six PT109s for the Navy. 2. Compare the cost predictions from requirement 1 (incremental unit-time learning model) with the cost predictions based on a cumulative average-time learning model which has total costs of $5,919,493. Why are the predictions different? How should Pacific Boat decide which model it should use? Cumulative average-time learning model's cumulative average time per unit and cumulative total time: Number of units Cumulative average time per unit: Labor-hours 1 Direct material cost 2 Direct manufacturing labor time for first boat 3 Direct manufacturing labor rate 4 Variable manufacturing overhead cost 5 Other manufacturing overhead B $ 199,000 Cumulative total time: Labor-hours 1 14,700 14,700 2 13,230 26,460 3 12,439 37,317 4 11,907 47,628 5 11,510 57,550 6 11,195 67,170 7 10,936 76,552 14,700 labor-hours $ 42 per direct manufacturing labor-hour $ 26 per direct manufacturing labor-hour 20% of direct manufacturing labor costs $279,000 6 Tooling costs 7 Learning curve for manufacturing labor time per boat 90% cumulative average 8 *Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat Using the formula for a 90% learning curve, In 0.90 In 2 -0.105361 0.693147 = -0.152004 Pacific Boat uses a 90% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours in its assembling operations. (A 90% learning curve means b = -0.152004.)