Question

At your Comp4U store, a common computer model has the following cost breakdown:

Parts and materials                     $1000

Labor = 3.5 hrs x $50/hr                 175

Profit margin                                      300

Total (price to customer)              $1475

A local customer has requested a bid for 20 identical computers. You figure that there is a 90% learning rate possible on the labor. If all other costs stay the same per unit and you want to maintain the same profit amount in dollars per unit, what is the price per unit you would bid?

Answer 1

With learning curve of 90% every output improves by 10% with time taken reducing accordingly:

Bid price with profit for 20 computers=

Total material cost = (1000*20)=$20,000

Total labor Cost=$2,556

Total Profit=(300*20)=$6,000

Total price =$28,556

Unit Number (quantity produced, pieces)	Unit time in hours	Time percent taken	Total Cost ($)	Cumulative Total Cost ($pc)
1	3.50	100.00	175.00	175.00
2	3.15	90.00	157.50	332.50
3	2.96	84.62	148.09	480.59
4	2.84	81.00	141.75	622.34
5	2.74	78.30	137.02	759.36
6	2.67	76.16	133.28	892.64
7	2.60	74.39	130.19	1022.83
8	2.55	72.90	127.58	1150.40
9	2.51	71.61	125.31	1275.71
10	2.47	70.47	123.32	1399.03
11	2.43	69.46	121.55	1520.58
12	2.40	68.54	119.95	1640.53
13	2.37	67.71	118.50	1759.03
14	2.34	66.96	117.17	1876.20
15	2.32	66.26	115.95	1992.15
16	2.30	65.61	114.82	2106.97
17	2.28	65.01	113.76	2220.73
18	2.26	64.45	112.78	2333.51
19	2.24	63.92	111.86	2445.37
20	2.22	63.42	110.99	2556.36