Innova, SA ASet Up a Table with Columns for Cumulative Number of Management

question 52

Essay

Innova, SA., is beginning the production of a new product. Management believes that 500 labour hours will be required to complete the new unit. An 80 percent incremental unit-time learning curve model for direct labour hours is assumed to be valid. Assume that the exponent b = -0.3219. Data on costs are as follows: $\begin{array}{ll}\text { Direct materials } & £ 50,000 \text { per unit } \\\text { Direct labour } & £ 20 \text { per direct labour hour } \\\text { Variable manufacturing overhead } & £ 30 \text { per direct labour hour }\end{array}$
a.Set up a table with columns for cumulative number of units showing the cumulative total time in hours using the incremental unit-time learning curve. Complete the table for 1, 2, 3, and 4 units given the individual unit time for the nth unit as 500, 400, 351, and 320 for 1 to 4 units respectively.
b.Set up a similar table assuming a 90 percent with the incremental unit-time learning curve with the individual unit time for the nth unit as 500, 450, 430, 405 for 1 to 4 units respectively.
c.What is the difference in variable cost of producing four units?

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Definitions:

Equity Method

A method of accounting for an investment in common stock by which the investment account is adjusted for the investor’s share of periodic net income and cash dividends of the investee.

Equity Method

An accounting technique used to record an investor's proportional share of the profits and losses of an equity-invested company.

Stock

Shares of ownership of a corporation.

Brokerage Commission

A fee charged by a broker for executing a transaction or providing specialized services.