Catonic Inc. recently developed a new product that includes Catonic's part number PCB-31, a complex printed circuit board. Although Catonic has the ability to manufacture PCB-31 internally, it is purchased from an independent supplier because the company's printed circuit line has been operating at capacity for some time.
The first contract for 50 units of PCB-31 was awarded to Rex Engineering Company in September, 20A, on the basis of a competitive bid. Rex's bid was significantly lower than those of other bidders. Additional orders for 50 units each were placed with Rex, as shown in the following purchase history schedule:

Mark Polmik, a buyer for Catonic, has determined that the next order for PCB-31 should be for 600 units. He has contacted Kathy Wentz, a Rex salesperson. Polmik indicated that the next PCB-31 order would be for 600 units and that he believed that Catonic should receive a lower unit price because of the increased quantity. A few days later, Wentz provided a proposal of $355 per unit for the 600-unit contract.
Polmik has scheduled a meeting with Wentz for next week for the purpose of negotiating the 600-unit contract. He has asked Catonic's Cost Accounting Department for assistance in evaluating the $355 unit price.
The price bid on the original contract for 50 units was estimated to be based on full cost, because at that time Catonic was not sure if there would be future contracts for the PCB-31 board. The cost of materials included in PCB-31 is estimated to be $180 per unit. The Cost Accounting Department is fairly sure that Rex applies overhead at 100% of direct labor and employee benefit cost. Because Rex Engineering recently received a good deal of coverage by the local media when a strike was narrowly averted, the labor and fringe benefit costs at Rex are known to be approximately $20 per hour. The printed circuit line at Rex is similar to the one at Catonic, and Rex's overhead is believed to be approximately 50% variable and 50% fixed. Similar work at Catonic evidences a 90% learning curve effect. However, it is assumed that the learning curve effect on overhead per unit is negligible.
Based on foregoing data, the price of a 50-unit order is estimated to comprise the following cost components:

Required:
(1) Prepare a schedule that can be used by Mark Polmik during his meeting with Kathy Wentz next week. This schedule should incorporate the learning curve effect that Rex would have experienced on the first 200 units already produced, which should be of use to Polmik negotiating a contract with Rex Engineering. Future production will be in lots of 50 units each, as was past production.
(2) What are the implications of an 80% learning curve as opposed to a 90% learning curve?
(3) Identify factors that could reduce the degree of learning that takes place in an industrial operation.

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Date Ordered September 15, 20A November 15, 20A January 1, 20B February 1, 20B Quantity Uit Price Total Price $374 374 374 374 50 50 50 50 $18,700 18,700 18,700 18,700 Labor and employee benefits (4 labor hours x $20) Overhead (100% of labor and employee benefits).....................................- 180 80 80 Full cost of PCB-31 component.n Profit contribution (10% of full cost) uann $ 340 34 $ 374 50 Unit price Total contract price...