Question

A manufacturer of car transmissions wants to develop a cost estimate for a customer’s order for 25 transmissions. It is estimated that the first transmission will take 100 hours of shop time and an 80% learning curve is expected. Using the learning curve tables:-
a. How many labour-hours should the 25th transmission require? [5 marks] b. How many labour-hours should the whole order for 25 transmission require? [5 marks] c. If the labour hour rate is $50 per hour and the pricing policy of the company is to double the labour costs of the order, what is the customer price for each transmission? [6 marks] d. Total Quality Management (TQM) can be an excellent quality management technique if properly implemented. Discuss the obstacles associated with the implementation of TQM. [9 marks]

Answer 1

Learning curve is 80%

Time for first unit (T1) = 100 hours

Time for nth unit = T1*Time factor for nth unit for Learning curve

Total time for n units = T1*Total time factor for n units for Learning curve

Using below table,

Time factor for nth unit for Learning curve of 80% = 0.355

Total time factor for n units for Learning curve of 80% = 12.309

a) Time for 25th unit = 100*0.355 = 35.5 hours

b) Total time for 25 units = 100*12.309 = 1230.9 hours

c) Total labor cost = Total time for 25 units*Labor rate = 1230.9*50 = 61545 $

As Pricing policy is to have double the Labor cost, then total price for 25 transmissions = 61545*2 = 123090 $

Price for each transmission = 123090/25 = 4923.6 $