An analyst predicts that an 80 percent experience curve should be an accurate pre- dictor of the cost of producing a new product. Suppose that the cost of the first unit is $1,000. What would the analyst predict is the cost of producing the a. 100th unit? b. 10,000th unit?
An analyst predicts that an 80 percent experience curve should be an accurate pre- dictor of the cost of producing a new product. Suppose that the cost of the first unit is $1,000. What would the analyst predict is the cost of producing the a. 100th unit? b. 10,000th unit?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:37. An analyst predicts that an 80 percent experience curve should be an accurate pre-
dictor of the cost of producing a new product. Suppose that the cost of the first unit
is $1,000. What would the analyst predict is the cost of producing the
a. 100th unit?
b. 10,000th unit?
Expert Solution
Step 1
The cost of producing the unit can be find out by using the following formula:
where,
a = Cost of first unit
u = Number of unit
b = Percentage of experience curve
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