Assume the same information for Genve Dfense Systmes as in Exercise9.17 except that Genve Dfense Systmes uses

Assume the same information for Genève Défense Systèmes as in Exercise9.17 except that Genève Défense Systèmes uses a 90% incremental unit-time learning curve as a basis for forecasting direct manufacturing labour-hours. (A 90% learning curve implies q = −0.1520.)

Required 1 Calculate the total variable costs of producing 2, 3 and 4 units.

2 If you solved Exercise9.17, compare your cost predictions in the two exercises for 2 and 4 units.

Why are the predictions different?

Exercise9.17

Genève Défense Systèmes manufactures radar systems. It has just completed the manufacture of its first newly designed system, RS-32. It took 3000 direct manufacturing labour-hours (DMLH)

to produce this one unit. Genève Défense Systèmes believes that a 90% cumulative average-time learning model for direct manufacturing labour-hours applies to RS-32. (A 90% learning curve implies q = −0.1520.) The variable costs of producing RS-32 are:

Required Calculate the total variable costs of producing 2, 4 and 8 units.

Transcribed Image Text:

Direct materials costs Direct manufacturing labour costs Variable manufacturing overhead costs SFr 80 000 per RS-32 SFr 25 per DMLH SFr 15 per DMLH