Leidsche Rijn Vinex project The housing project developer Van Dijk has started to build in the north west corner of the Leidsche Rijn project near Utrecht. His contract defines the building of homes for middle class owners with two to five children. In order to remain competitive Van Dijk decided to build standard houses. These houses are newly designed and have not been built before.

The first 16 houses have recently been finished and the following cost summary has just been presented to Van Dijk:

The term CumAvCost stands for ‘Cumulative Average Cost’.
Required:
1. What is the learning ratio of this project?
2. What is the cost function when we apply the learning rate formula? Plot the results and comment on them.
3. Use Excel’s linear regression function on appropriately transformed data to determine the project’s cost function. Add the result to the plot and comment.
4. Does learning take place at a steady pace? If not, what does the learning pattern look like? Please explain.
5. Van Dijk wants to double the production. What will be the average cost of a home when the total of 32 homes has been produced?

Production costs Houses 1 CumAvCost 300000 -2345678 240000 216000 201600 198000 182000 179000 177408 9 174000 10 172000 11 168000 12 168000 13 167000 14 166000 15 164000 16 163215