In: Statistics and Probability
Using the formula Yx=Axb, where:
Yx = the cost of unit x (dependent variable)
A = the theoretical cost of unit 1 (a.k.a. T1)
x = the unit number (independent variable)
b = a constant representing the slope (slope = 2b)
Calculate the unit theory first theoretical unit cost (T1) if the production quantity was 270 and the average unit cost was $2.74. Assume a 78% learning rate.