Markham,Inc

question 13

Essay

Markham,Inc.has received a contract for 8 units of a new product.The contract is a cost-plus contract,with the total to be received equal to the total labor cost + 30%.Markham found that the first unit of a new product required 90 hours to complete.The second unit was completed using only 76.5 hours.Markham believes that the rate of learning that was observed will continue for all 8 units of the contract.The labor wage paid is $40/hour.The following factors are available for various rates of learning: 80% learning,b = -.3219;85%,b = -.2345;90%,b = -.1520;95%,b = -.0740.
Required:
(a. )What will the total labor cost be for the contract?
(b. )What will be the total fee for the contract?

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Definitions:

Oligopoly

A market structure characterized by a few companies controlling the majority of market share, which can lead to limited competition.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, and free entry and exit, leading to an efficient allocation of resources.

Monopoly

A market structure characterized by a single seller controlling a large portion of the market, facing little to no competition.

U.S. Beer Industry

The sector within the United States that involves the production, distribution, and sale of beer.