Tutorial 4 – Learning curve - answer UBAM2023

Q1 Self-review

Q2

b = log 0.8/log 2 = -0.3219

For 4, average time per unit Y = 22 x 4-0.3219

= 14.0806

For 3, average time per unit Y = 22 x 3-0.3219

= 15.4468

Total time for 4 units = 14.0806 x 4 = 56.3224

Total time for 3 units = 15.4468 x 3 = 46.3404
Time for unit no. 4 9.982

Q3

b = log 0.8/log 2 = -0.3219

For cumulative 8 units, average time per unit Y = aXb

= 80 x 8 -0.3219
= 40.9624

Total time for 8 units = 40.9624 x 8 = 327.6992

Total direct labour cost = 327.6992 x $7.50

= $2457.744

Total direct material 4,000 x 8 = 32,000

Total direct labour = 2,458
Total fixed cost = 6,400
Total Cost 40,858

Cost per unit = 40858 / 8 = $5,107.25

1
Q4

(i) Time for second batch, sum of third and fourth together

Average
Cumulative Incremental Incremental
Cumulative units time per
Total time units Total time
unit
1 120 120 1st 120
2 108 216 2nd 96
4 97.2 388.8 3rd and 4th 172.8

(ii) Budget
2020
Quarter 1 Quarter 2
$ $
Sales 54,000 54,000
($1200 x 45 batches)
Less:
Variable Cost
Material - -
Labour (see workings)
(2521.95 x $5) 12,610
(2286.45 x $5) 11,432
Variable overhead
(150% of direct labour cost) 18,915 17,148
Total variable costs 31,525 28,580
Contribution 22,475 25,420

Workings:
Total time for 75 batches = 75 x 62.25 = 4668.75
Total time for 30 batches = 30 x 71.56 = 2146.80
Total time for 45 batches (Q1 2020) 2521.95

Total time for 120 batches = 120 x 57.86 = 6955.20

Total time for 75 batches = 4668.75
Total time for 45 batches (Q2 2020) 2286.45

(iii) b = log 0.90 / log 2 = -0.1520

For cumulative 132 batches, Average time per batch Y = 120 x 132 -0.1520
= 57.13

Total time for 132 batches = 132 x 57.13 = 7541.16

Total time for 120 batches = 6955.20
Total time for 12 batches (Q3 2020) 585.96

Labour cost in Q3 2020 = 585.96 x $5 = $2929.80

Variable overhead cost in Q3 2020 = 150% x $2929.80 = $4394.70