Chapter 10, Problem 10.34E

Learning curve, incremental unit-time learning model. Assume the same information for Northern Defense as in Exercise 10-33, except that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours.

(An 85 % learning curve means b = −0.234465.)

1. 1. Calculate the total variable costs of producing 2, 3, and 4 units.

  Required

1. 2. If you solved Exercise 10-33, compare your cost predictions in the two exercises for 2 and 4 units. Why are the predictions different? How should Northern Defense decide which model it should use?