The WLJ Boat ?Company, which is under contract to the U.S.? Navy, assembles troop deployment boats. LOADING... ?(Click the icon to view the additional? information.) WLJ Boat reports the following cost information for the first PT109 assembled. LOADING... ?(Click the icon to view the cost? information.) Read the requirements LOADING... . Requirement 1. Prepare a prediction of the total costs for producing the six PT109s for the Navy. Begin by calculating the cumulative total time in? labor-hours. ?(Round the individual unit time for Xth unit to the nearest whole? number.) Number of Individual unit time for Cumulative total time: units Xth unit: Labor-hours Labor-hours 1 2 3 4 5 6 7

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

WLJ Boat

submit a proposal on the cost of producing another six PT109s.

WLJ Boat

reports the following cost information for the first PT109 assembled.

Direct material cost	$198,000
Direct manufacturing labor time for first boat	15,600	?labor-hours
Direct manufacturing labor rate	?$37	per direct manufacturing? labor-hour
Variable manufacturing overhead cost	?$27	per direct manufacturing? labor-hour
Other manufacturing overhead	20%	of direct manufacturing labor costs
Tooling costsSuperscript aa	$278,000
Learning curve for manufacturing labor time per boat	90?%	incremental ?unit-timeSuperscript bb

Superscript aa	Tooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat.
Superscript bb	Using the formula for a 90?% learning? curve, StartFraction ln 0.90 Over ln 2 EndFraction equals StartFraction negative 0.105361 Over 0.693147 EndFraction equals negative 0.152004ln 0.90ln 2=?0.105361 0.693147=?0.152004

WLJ 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?.)

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 $5,874,625.

Why are the predictions? different? How should WLJ Boat decide which model it should? use?

Number of

Cumulative average time

Cumulative total time:

units

per unit: Labor-hours

Labor-hours

units

Xth unit: Labor-hours

Labor-hours

1

15,600

15,600

2

14,040

29,640

3

13,201

42,841

4

12,636

55,477

5

12,215

67,692

6

11,881

79,573

7

11,606

91,179