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The Pacific Shore Company, which is under contract to the Navy, assembles troop deployment boats. As part of its research program, it completes the assembly
The Pacific Shore Company, which is under contract to the 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 Shore submit a proposal on the cost of producing another six PT109s. Pacific Shore 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.) (Click the icon to view the cost information.) Required Cost information Direct material cost $201,000 Direct manufacturing labour time for first boat 15,400 labour-hours Direct manufacturing labour rate $46 per direct manufacturing labour-hour Variable manufacturing overhead cost $24 per direct manufacturing labour-hour Other manufacturing overhead 25% of direct manufacturing labour costs Tooling costsa $281,000 Learning curve for manufacturing labour time per boat 90% cumulative average timeb a Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat In 0.90 -0.105361 b Using the formula for a 90% learning curve, b = = -0.152004 In 2 0.693147 Requirement 1. Calculate predicted total costs of producing the six PT109s for the Navy. (Pacific Shore will keep the first deployment boat assembled, costed at $1,560,000, as a demonstration model for potential customers.) Begin by determining the hours used to produce the six PT109s for the Navy. (Round your answers to the nearest whole number.) The total cumulative time in labour-hours for seven PT109s is hours; therefore, the total time to produce six PT109s is hours
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