Assume the same information for Northern Defense as in Exercise 10-28, except that Northern Defense uses an 85% incremental unit-time learning model as a basis for predicting direct manufacturing labor-hours. (An 85% learning curve means b = -0.234465.)
In Exercise 10-28, Northern Defense manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. Manufacturing data for the RS-32 follow:
1. Calculate the total variable costs of producing 2, 3, and 4 units.
2. If you solved Exercise 10- 28, compare your cost predictions in the two exercises for 2 and 4 units. Why are the predictions different? How should Northern Defense decide which model it should use?