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Boo Ltd have been approached by Atticus Ltd to make a component for their product the 'Scout' This component would be prepared in two departments. It would start in the machining department and move through the production process to the assembling department. The following estimates have been prepared by the company accountant: Machining Assembling Standard wage rate 8.00 9.00 Standard Variable overhead per labour hour 2.50 1.50 Standard Fixed overhead per labour hour 4.00 4.00 Direct labour hours expected for the first unit 50hrs 25hrs The machining process requires 5kgs of material Z for each unit produced and the assembling process requires 4kgs of material Y for each unit produced. The suppliers of material Z have stated that any purchases above 100kgs in this year will attract a 15% discount on the original price of 3.00 The suppliers of material Y are willing to supply the first 40kgs in this year at 2.50 per kg, the next 25kgs at 10% discount and any further purchases at 20% discount on original price. It is expected that a 75% learning curve effect will apply in the machining department and that the learning curve experienced in the assembling department will follow the same pattern as a similar project just completed, detailed below: No. of units 1 2 4 Cumulative average time 9 8.1 7.29 If Atticus Ltd is satisfied with the quality of the component, it is likely that they will contract to purchase another 35 components in the financial year. It is anticipated that the learning curve effect within the machining department will cease after 100 units and that the learning curve effect within the assembling department will cease after 15 units (with the 15th unit representing the standard time). The company requires a 20% profit margin on sales. Required: a) State the learning curve formulas as applied to the respective departments b) Calculate the selling price per unit that should be charged for the first 15 units given that there is no guarantee of receiving further orders. c) Calculate the contracted selling price per unit for the additional 35 units. d) Explain the difficulty in forming standard costs when a learning curve effect is expected to apply