Chapter 3, Problem 42P

Thames Assurance Company sells a variety of life and health insurance products. Recently, Thames developed a long-term care policy for sale to members of university and college alumni associations. Thames estimated that the sale and service of this type of policy would be subject to a 90 percent cumulative average-time learning curve model. Each unit consists of 350 policies sold. The first unit is estimated to take 1,000 hours to sell and service.

Required:

1. 1. Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and the cumulative total time in hours. Complete the table for 1, 2, 4, 8, 16, and 32 units.
2. 2. Suppose that Thames revises its assumption to an 80 percent learning curve. How will this affect the amount of time needed to sell and service eight units? How do you suppose that Thames estimates the percent learning rate?