Question:

You need to develop a cost estimate for a customer order of 12 custom commercial printing presses. It is
estimated that the first press will require 750 labor-hours; a learning curve of 80 percent is expected.

(a) How many labor-hours are required for the sixth printing press?
(b) How many labor-hours are required for the twelfth printing press?
(c) How many labor-hours are required to complete all 12 printing presses?
(d) If the average labor-hour cost is 24, what is the total labor cost for building the 12 printing
presses?
(e) If your company typically prices products at times the labor cost, what is the price quoted to the
customer?

Solution:
a) We know that
80 𝑝𝑒𝑟𝑐𝑒𝑛𝑡 𝐿𝑒𝑎𝑟𝑛𝑖𝑛𝑔 𝐶𝑢𝑟𝑣𝑒 = 0.562
𝐿𝑎𝑏𝑜𝑟 𝐻𝑜𝑢𝑟𝑠 = 0.562 × 750 𝐻𝑜𝑢𝑟𝑠 = 421.5
b) The coefficient for the twelfth unit is 0.449, so the time to build the twelfth unit is 336.75 hours
c) Time for all 12 printing presses = 750 × 7.227 = 5420.25
d) Total labor cost = 5420.25 × 24 = 130,086
e) The price quoted to the customer = 130,086 × 2.5 = 325,215