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# Learning rate; total cost of building

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Company X collected the following cost data on the first 6 units of a new machine.

Unit number Cost, \$ millions
1 300
2 244
3 211
4 194
5 179
6 169

Using Excel:
(a) Estimate the learning rate.
(b) Company X is bidding on a contract for 24 new machines. Explain how the estimated learning curve is helpful to Lockheed.
(c) Estimate the total cost of building 24 additional machines.
(d) Estimate the cost of building the 30th machine.

#### Solution Preview

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Company X collected the following cost data on the first 6 units of a new machine.

Unit number Cost, \$ millions
x Yx Ln(x) Ln(Yx)
1 300 0.000 5.704
2 244 0.693 5.497
3 211 1.099 5.352
4 194 1.386 5.268
5 179 1.609 5.187
6 169 1.792 5.130

Using Excel:
(a)  Estimate the learning rate.
The normal form of learning equation is Yx = Kx^n
Where:
x= unit number
Yx=Cost of producing the xth unit
K=Cost to procude the first unit
n=log b/log 2 where b is learning ...

#### Solution Summary

This post shows how to calculate learning rate, total cost of building in different number of machines

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