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The personnel manager at Powerwest Inc. wants to estimate the direct and cumulative average direct labor hours for producing 30 locomotive train units during the next year.
He estimates from past experience that the learning rate is 90 percent. The production department estimates that manu- facturing the first unit will take 30,000 hours. Each employee averages 200 hours per month.
The production rate forecast is as follows:
Month
Production Rate (units)
January
2
July
February
3
August
4
March
September
April
October
May
November
1
June
December
How many direct hours are required to produce the 30th unit?
How many total hours are needed to produce all 30 units?
What is the maximum number of employees required next year?
If the learning rate were changed to 0.85, what would be the impact on the total hours and the number of employ- ees needed to produce 30 units?
The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost.
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