Explain what a learning curve effect is, and suggest reasons for the effect in this particular case.
Delroads Electronics Ltd (DEL) produces a variety of products including an electronic
navigational unit for use in ships. Construction of the unit is a delicate assembly operation
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Nowby a team of highly skilled operatives. Components used in the unit are purchased from
outside manufacturers. The unit is sold in relatively small numbers, and a new model is produced
each year.
Costs associated with production of the 20X9 model of the unit are:
Fixed costs £35,000
Variable costs £20 wages per labour hour worked, plus £20 materials per unit
Production of the first unit of the 20X9 model will take 60 labour hours, and work of
the operatives is known to be subject to an 83 per cent learning curve effect. Learning curve
effects are achieved only within a model.
Market research has forecast that annual sales of the 20X9 model are associated with unit
prices as follows:
1 unit can be sold at unit price £10,000
500 units can be sold at unit price £327.80
(a) Explain what a learning curve effect is, and suggest reasons for the effect in this particular case.
(b) Draw a diagram (accurately to scale) on the graph paper supplied, demonstrating the
relationship between units of output, total costs and total revenues in respect of the 20X9 model. Set out sufficient workings to justify your diagram.
(c) Use your diagram and supporting workings to identify the profit-maximising units of output and unit price in respect of the 20X9 model.
The post Explain what a learning curve effect is, and suggest reasons for the effect in this particular case. appeared first on Best Custom Essay Writing Services | EssayBureau.com.
