How to calculate basic premise learning curve?
Company X plans to manufacture a Product A that requires substantial amount of direct labor on each unit. Based on the company's experience with other products that requires similar amounts of direct labor, management believes that a learning factor exists in the production process used to manufacture a Product A.
Each unit of A requires 50 square feet of direct material at a cost of $30 per square foot, for a total material cost of $1,500. The standard direct-labor rate is $25 per direct-labor hour. Variable manufacturing overhead is assigned to products at a rate of $40 per direct-labor hour. In determining an initial bid price for all products, the company marks up variable manufacturing costs (=direct materials + direct labor + variable overhead) 30 percent. (That is, the bid = 130 percent of variable manufacturing costs.)
Data on the production of the first two lots (16 units) of product A follow:
1. The first lot of eight units required a total of $3,200 direct labor hours.
2. The second lot of eight units required a total of $2,240 direct-labor hours.
Based on prior production experience, Company X estimates that production time will show no significant improvement after first 32 units. Therefore, a standard (for planning purposes) for direct-labor hours will be established based on the average number of hours per units 16 through 32.
What is the basic learning curve?
What learning rate appears to be applicable to the direct labor required to produce product A?
You will find the answer to this puzzling question inside...
Examination and Possible Change in Operating Conditions
See the attachments.
The question involves the examination of a possible change in operating conditions that does not involve a change in capital outlay. Hint first determine is this an annual cost only or does present value need to be accounted for.
A concentrator with a nominal 12,000 tonne per day capacity operates 360 days per year. The grinding circuit consists of three parallel circuits. Each circuit needs to be shut down for relining at four monthly intervals. The current method of relining takes five days to complete and costs $ 30,000 in consumable supplies. A proposed alternative method is under investigation and would involve a two day shut down and cost $ 190,000 in consumable supplies.
Should the alternative method be used if the following conditions apply:
1 Milling reserve, a minimum of 9 years supply at a head grade of 1.2 %
2 Performance of the concentrator at 1.2 % head grade is 92%, with the concentrate grading at 28% of the mineral (on a dry basis) and 10% moisture.
3 The selling price is not likely to go below $ 1.50 per kg.
4 The operating costs below are applicable
General overheads fixed at $12,000 per day
Mining fixed costs $40,000 per day
Mining variable costs $2.00 per tonne milled
Milling Fixed costs $ 24,000 per day
Milling variable costs (grinding media and power) $1.00 per tonne milled.