A Contractor Builds Large Ships for the Department of Defense

question 12

Essay

A contractor builds large ships for the Department of Defense. A recent contract called for 12 amphibious landing platforms. It was originally estimated that the first of these would cost $1 billion and that 80 percent learning would be appropriate. In fact, the first ship cost $1.6 billion and the second $1.12 billion. What is the revised learning rate?
What will be the total cost of the twelve ships?
Is it higher or lower than the original estimates?
If the defense department cuts the contract from 12 ships to 9, what happens to the average cost per ship?

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Definitions:

Planning Time Horizons

The periods over which organizations or individuals plan their activities and objectives, typically categorized as short, medium, or long term.

Short-Range Plans

Strategies and actions that are intended to achieve goals within a relatively brief period, typically up to one year.

Intermediate-Range Plans

Planning strategies that focus on a medium-term horizon, typically ranging from one to five years, balancing short-term and long-term objectives.

Long-Range Plans

Formulating strategies and goals for an extended time frame to guide an organization towards its vision.