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6.5 Experience Curve Imagine company XYZ manufacturers some electronics parts for Tesla. The sales have been increasing in the last 3 months, but Tesla is asking to cut its sales price to Tesla. The company XYZ has seen a decline in its overall costs and only want to reduce the sales price to Tesla equal to its savings in costs to protect its profit margins. Month 1 2 3 Cost per unit S82 566 $58 Monthly Production Quantity 131.500 149,900 160,400 A. Calculate the rate of learning at the end of period 3. What can we expect to happen to the cost per unit every time cumulative production doubles? B. Given the rate of learning (b) you calculated in question A and given that the firm expects to produce 218,000 units in month 4, forecast unit cost at the end of month 4. Assume there are no plans to alter the product's attributes in any way. C. Imagine the firm wants their unit cost for SAMA to be at most $50 by the end of month 4. How many units will they need to produce in month 4? Hint: Remember our formula for the experience cost curve: UC+=C1 (CV/CV1) See Appendix 6.2 6.5 Experience Curve Imagine company XYZ manufacturers some electronics parts for Tesla. The sales have been increasing in the last 3 months, but Tesla is asking to cut its sales price to Tesla. The company XYZ has seen a decline in its overall costs and only want to reduce the sales price to Tesla equal to its savings in costs to protect its profit margins. Month 1 2 3 Cost per unit S82 566 $58 Monthly Production Quantity 131.500 149,900 160,400 A. Calculate the rate of learning at the end of period 3. What can we expect to happen to the cost per unit every time cumulative production doubles? B. Given the rate of learning (b) you calculated in question A and given that the firm expects to produce 218,000 units in month 4, forecast unit cost at the end of month 4. Assume there are no plans to alter the product's attributes in any way. C. Imagine the firm wants their unit cost for SAMA to be at most $50 by the end of month 4. How many units will they need to produce in month 4? Hint: Remember our formula for the experience cost curve: UC+=C1 (CV/CV1) See Appendix 6.2