A Metal Works Fabricator Is About to Release a New

question 55

Essay

A metal works fabricator is about to release a new model of his firm's copper sculpture and fountain. The operations manager estimates that this product is subject to a 90 percent learning rate on labor only-the material bill is not affected by experience. The firm prices its work based on cost-the sum of materials plus 30 percent and labor plus 50 percent. (This allows the firm to practice a little "demand management" for its very popular works.) The first item has already been finished; the material bill was $800 and labor totaled 40 hours. The firm pays its metalworking artisans an average of $18 per hour. What should be the asking price of the first unit?
The second?

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Definitions:

Lobster Dinner

A meal featuring lobster as the main course, often considered a luxury or special occasion dish.

Inelastic

Inelastic refers to a situation in economic terms where the demand or supply for a good or service is relatively unresponsive to changes in price, meaning the quantity demanded or supplied changes by a smaller percentage than the price change.

Perfect Competition

A market structure characterized by an infinite number of buyers and sellers, homogeneous products, perfect information, and no barriers to entry or exit.

Resources Allocation

The process of assigning available resources among various uses in an economy or organization to maximize the efficiency of those resources.