Innova, SA

question 53

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. A 90 percent cumulative average-time learning curve model for direct labour hours is assumed to be valid. Data on costs are as follows: Required:
a.
Set up a table with columns for cumulative number of units, cumulative average time per unit in hours, and cumulative total time in hours using the cumulative average-time learning curve. Complete the table for 1, 2, 4, and 8 units.
b.
Set up a similar table assuming an 80 percent with the cumulative average-time learning curve.
c.
What is the difference in variable cost of producing four units?