View Home Insert Page Layout Formulas Data Review 1 Direct material cost 2 Direct manufacturing labor time for first boat 3 Direct manufacturing labor rate 4 Variable manufacturing overhead cost 5 Other manufacturing overhead 6 Tooling costsa 7 Learning curve for manufacturing labor time per boat $ 199,000 14,700 labor hours 42 per direct manufacturing labor-hour 26 per direct manufacturing labor-hour 20% of direct manufacturing labor costs $ 279,000 90% cumulative average time 9 FTooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat. 10 In 0.9 11 PUsing the formula (page 391) for a 90% learning curve, b= "n 2 -0.105361 =-0.152004 0.693147 %3D 1. Calculate predicted total costs of producing the six PT109S for the Navy. (Pacific Boat will keep the first deployment boat assembled, costed at $1,477,600, as a demonstration model for potential customers.) 2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109S in requirement 1 and (b) the predicted total costs for producing the six PT109S, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturing labor-hours. Required

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Cost estimation, cumulative average-time learning curve. The Pacific Boat Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Pacific Boat submit a proposal on the cost of producing another six PT109s. Pacific Boat reports the following cost information for the first PT109 assembled and uses a 90% cumulative average-time learning model as a basis for forecasting direct manufacturing labor-hours for the next six PT109s. (A 90% learning curve means b = −0.152004.)

View
Home
Insert
Page Layout
Formulas
Data
Review
1 Direct material cost
2 Direct manufacturing labor time for first boat
3 Direct manufacturing labor rate
4 Variable manufacturing overhead cost
5 Other manufacturing overhead
6 Tooling costsa
7 Learning curve for manufacturing labor time per boat
$ 199,000
14,700 labor hours
42 per direct manufacturing labor-hour
26 per direct manufacturing labor-hour
20% of direct manufacturing labor costs
$ 279,000
90% cumulative average time
9 FTooling can be reused at no extra cost because all of its cost has been assigned to the first deployment boat.
10
In 0.9
11 PUsing the formula (page 391) for a 90% learning curve, b= "n 2
-0.105361
=-0.152004
0.693147
%3D
1. Calculate predicted total costs of producing the six PT109S for the Navy. (Pacific Boat will keep the first
deployment boat assembled, costed at $1,477,600, as a demonstration model for potential customers.)
2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six
PT109S in requirement 1 and (b) the predicted total costs for producing the six PT109S, assuming that
there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for
units produced and direct manufacturing labor-hours.
Required

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