Analysis and Forecasting Techniques Paper 3

1

SleepTight, a nationwide retail mattress firm, will begin selling high-end crib mattresses next year. Management believes sales for this product will be driven primarily by birth rates but will be influenced to a lesser extent by income levels. The best method for SleepTight to use to predict next year’s sales is






2

Corrigon Industries is preparing a bid for a special project requiring the production of 35,000 units. The engineering personnel have advised that the units can be produced in groups with the first group consisting of 1,000 units. A review of prior experience indicates that the direct labor time needed per unit will be progressively smaller by a constant percentage rate as experience is gained in the production process. The quantitative method that would best estimate Corrigon’s total cost for the project is






3

The average labor cost per unit for the first batch produced by a new process is $120. The cumulative average labor cost after the second batch is $72 per product. Using a batch size of 100 and assuming the learning curve continues, the total labor cost of four batches will be






4

Lake Corporation manufactures specialty components for the electronics industry in a highly labor intensive environment. Arc Electronics has asked Lake to bid on a component that Lake made for Arc last month. The previous order was for 80 units and required 120 hours of direct labor to manufacture. Arc would now like 240 additional components. Lake experiences an 80% learning curve on all of its jobs. The number of direct labor hours needed for Lake to complete the 240 additional components is






5

A particular manufacturing job is subject to an estimated 90% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after four units are completed?






6

A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50 labor hours to complete. If the learning curve is based on a cumulative average time per unit assumption, what is the time required to complete the second unit?






7

A learning curve of 80% assumes that direct labor costs are reduced by 20% for each doubling of output. What is the incremental cost of the sixteenth unit produced as an approximate percentage of the first unit produced?






8

Red Baron, Inc., is a new competitor in the production of airplane propellers. Red Baron has to train its employees in the process of making propellers. To increase the speed of learning, Red Baron will give a bonus to the employee with the lowest cumulative average time per unit after eight units are completed. Lucy took 50 hours to complete the first unit, and she is subject to an 80% learning curve. Sally took 60 hours to complete the first unit, and she is subject to a 70% learning curve. Marcy took 40 hours to complete the first unit, and she is subject to a 90% learning curve. Patty took 55 hours to complete the first unit, and she is subject to a 75% learning curve. Which employee will receive the bonus?






9

It is estimated that a particular manufacturing job is subject to an 80% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after completing four units?






10

A company plans to bid on a special project that calls for a total of 24,000 units. The units will be produced in lots, with the first lot consisting of 750 units. Based on prior experience, the direct labor time needed per unit of product will be progressively smaller by a constant percentage rate as experience is gained in the manufacturing process. The quantitative method that would best estimate the company’s total cost for the project is






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