Austral Fine Furniture manufactures high-quality furniture. During the past year, the company's design department developed new product, a marble-topped dining table. This would be the first time that Austral would work with marble. The company's existing products were made of timber, sometimes in conjunction with glass. The design department selected a team of experienced tradespersons to manufacture a trial batch of 10 marble-topped tables. A task analysis of the processes used to produce this batch of tables indicated the following direct inputs and average costs per table:

Direct material.........................................................$300

Direct labour.............................................................200

The average hourly labour rate for the team of tradespersons was $20 per hour.

Required:

Assuming an 8o per cent learning curve':

1. Estimate how many direct labour hours will be required to produce a second batch of 10 marble-topped dining tables.

2. What is the direct labour cost per table for this second batch?

3. Will the last table produced in the second batch take the same amount of direct labour time as did the first table in the batch? Why?

4. Assume that after completing and selling these first two batches Austral receives an order from a wholesaler for a batch of 60 tables. Wow many direct labour hours will be required to produce this batch of tables?

5. What is the direct labour cost per table for the order from the wholesaler?

6. Austral uses a cost plus 'margin' approach to pricing its products. What implications does the learner curve effect have for the price of the marble-topped dining table?