The Pacific Boat Company, which is under contract to the U.S. Navy, assembles troop deployment boats. As part of its research program, it completes the assembly of the first of a new model (PT109) of deployment boats. The Navy is impressed with the PT109. It requests that Pacific Boat submit a proposal on the cost of producing another six PT109s. Pacific Boat reports the following cost information for the first PT109 assembled and uses a 90% cumulative average-time learning model as a basis for forecasting direct manufacturing labor-hours for the next six PT109s. (A 90% learning curve means b = -0.152004.)

Required
1. Calculate predicted total costs of producing the six PT109s for the Navy. (Pacific Boat will keep the first deployment boat assembled, costed at $1,477,600, as a demonstration model for potential customers.)
2. What is the dollar amount of the difference between (a) the predicted total costs for producing the six PT109s in requirement 1 and (b) the predicted total costs for producing the six PT109s, assuming that there is no learning curve for direct manufacturing labor? That is, for (b) assume a linear function for units produced and direct manufacturing labor-hours.

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Home Insert Page Layout Formulas Data Review View 1 Direct material cost 2 Direct manufacturing labor time for first boat 3 Direct manufacturing labor rate 4 Variable manufacturing overhead cost 5 lOther manufacturing overhead $199,000 14,700 labor hours $42per direct manufacturing labor-hour $26per direct manufacturing labor-hour 20%of direct manufacturing labor costs 6 Tooling costs 7 Learning curve for manufacturing labor time per boat $279,000 90%) cumulative average time 9 Tooling can be reused at no extra cost because all of its cost has been assigned to the first d 10 t boat In 0.9-0.105361 gthe formula (page 391) for a 90% learning curve, b-In2-0693 ; -0.152004