Shimbungu construction Ltd limited traditionally designs and manufacturers lightweight aircraft. Orders for these aircraft have decreased over the past two years; so to enable the company to survive, it has been decided by Shimbungu's board of directors to start manufacturing bigger aircraft.

The production manager expects the first plane to take 330 000 minutes to build, and from past experience believes a 90% learning curve effect could be achieved. The relevant costs are as follows:

Direct material	N$50 000 per aircraft
Direct labour	N$10 per hour
Variable overheads	N$0.50 per direct labour hour
Fixed overheads	N$1.00 per labour hour

Profit mark-up is usually 10% per aircraft.

Required:

A local Airline (Fly Namibia Ltd) has offered to purchase four aircrafts. Estimate the price that Shimbungu Limited should quote for these four aircrafts.

Note: Learning coefficient should be rounded off to 4 decimals while all other answers are rounded off to the whole numbers.

Answer rating: 100% (QA)

Estimating the Price for Four Aircrafts 1 Learning Curve Effect A 90 learning curve indicates that w... View the full answer