Learning Curve Examples. 1.

Boeing Aircraft collected the following cost data on the first 8 units of its new business jet. Cost ($ millions) $100 83 73 62 Unit Number 5 6 7 8 Cost ($ millions) 60 57 53 51

Unit Number 1 2 3 4

a. Estimate the learning curve for the new business jet. Find the 4 learning rates and add them up and average them. 3.180/4 = .795 or 80% b. Estimate the average cost for the first 1,000 units of the jet. T sub 1000 = 100M X (158.7)2nd page 80% = $15,870M c. Estimate the cost to produce the 1,000th jet. T sub 1000 = 100M X (.1082) first page 80% = $10.82 M

2.

Johnson Industries received a contract to develop and produce four highintensity long-distance receiver/transmitters for cellular telephones. The first took 2,000 labor hours and $39,000 worth of purchased and manufactured parts; the second took 1,500 labor hours and $37, 050 in parts; the third took 1,450 labor hours and $31,000 in parts; and the fourth took 1,275 labor hours and $31,492 in parts. Learning curve Labor / T sub 1 = 2000 learning curve cost $/ tsub1 = $39000 graph 1-------4-5--------16 T2/t1 = 1500/2000 = . 75 learning rate 80% for labor t4/t2= 1275/1500=.85 avg them =

.95 .8499 = .8999 or .9 learning rate for cost. T sub 16 = 2000X 8.920 = 17,840 hours T 4 = 2000 X 3.142 = 6,284 subtracted from 17840 = 11556 labor hours to do the last dozen Cost = T16 39000 X 12.04 = $ 469,560 T4 39000 X 3.556 =138684 subtracted from 469560 = 330,876 Johnson was asked to bid on a follow-on contract for another dozen receiver/transmitter units. Ignoring any forgetting factor effects, what should Johnson estimate time and parts costs to be for the dozen units. (hint: there are 2 learning curves-one for labor and one for parts.)