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CRM Limited is a company that manufactures products required by technology companies. Recently they designed an advanced product. This machine can be used to improve efficiencies in the construction of processors. Hence, the company is expecting a large market share. Below are the figures showing the estimated cost and selling price of the first machine: Cost of material and components Labor costs (200 hours @ $12 per hour Overheads (40% of labour cost) Total costs Profit (20% of cost) Selling price 3,150 2,400 960 6.150 1,230 7.380 The manager of CRM Ltd has identified some aspects related to the sale of the new product: The selling price of the equipment will be determined by the total cost plus 20%. The cost of material required per product will not change, even if greater quantities are produced. The management expects that the workers will learn and improve regularly. They anticipate a leaming curve of 85%. CRM Ltd has been approached by Tech Ltd, which is interested in purchasing the new product. Tech Ltd has requested a quotation covering the following aspects: 1. If we decide to buy the first eight machines assembled, what would be the price per machine? 2. If we purchase the first machine manufactured and immediately place an order for the second one, what would be the price for the second machine? 3. If we are ready to wait for a while until CRM sells two machines to other buyers, and then place an order for the third and fourth machines, what would be the average price of these two machines? CRM Limited is a company that manufactures products required by technology companies. Recently they designed an advanced product. This machine can be used to improve efficiencies in the construction of processors. Hence, the company is expecting a large market share. Below are the figures showing the estimated cost and selling price of the first machine: Cost of material and components Labor costs (200 hours @ $12 per hour Overheads (40% of labour cost) Total costs Profit (20% of cost) Selling price 3,150 2,400 960 6.150 1,230 7.380 The manager of CRM Ltd has identified some aspects related to the sale of the new product: The selling price of the equipment will be determined by the total cost plus 20%. The cost of material required per product will not change, even if greater quantities are produced. The management expects that the workers will learn and improve regularly. They anticipate a leaming curve of 85%. CRM Ltd has been approached by Tech Ltd, which is interested in purchasing the new product. Tech Ltd has requested a quotation covering the following aspects: 1. If we decide to buy the first eight machines assembled, what would be the price per machine? 2. If we purchase the first machine manufactured and immediately place an order for the second one, what would be the price for the second machine? 3. If we are ready to wait for a while until CRM sells two machines to other buyers, and then place an order for the third and fourth machines, what would be the average price of these two machines?

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A Establishing selling price of a product with the help of learning curve Under the Learning curve model the cumulative average time per unit produced is assumed to fall by a constant percentage every ... View the full answer