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You have just received 10 units of a special sub assembly from an electronics manufacturer at a price of $250 per unit. A new order has also just come in for your computer's product that uses these sub-assemblies, and you wish to purchase 40 more to be shipped in lots of 10 units each. (The sub-assemblies are bulky and you need only 10 a month to fill your new order.) A. Assuming a 70% learning curve by your supplier on a similar product last year, how much should you pay for each lot? Assume that the learning rate of 70% applies to each lot of 10 units, not each unit. B. Suppose you are the supplier and can product 20 units now, but cannot start production on the second 20 units for two months. What price would you try to negotiate for the last 20 units?
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