Question

3) You are an experienced machinist with a small tool shop. You have been asked to submit a bid to produce twenty (20) special clamps for a new die that is under construction. You estimate that the material costs (metal and fasteners) for each clamp are $150.00. You also estimate that 10.00 labor hours are needed to produce the first clamp. The value of your labor is $60/hour.

a. From similar orders in the past, you estimate that there is a 80% learning curve for this type of work. Using this information, what is the lowest total bid you should submit if you charge a 25% markup on material and you wish to recoup your labor costs? (Hint: if you know how, it will save time to set up formulas in Excel. Just attach a print-out of Excel work) (3 POINTS)

b. Your potential customer is receptive to your bid from part A but is hesitant to award you the order because the average cost per clamp that you bid is 5% higher than his target. You respond to the customer that if they would increase their order from 20 clamps to X clamps, you could beat his target price. What is X? (Hint: again, while you can do it by hand, it is tedious so setting it up in Excel saves time. Just attach a print-out of Excel work) (3 POINTS)

Answer 1

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