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 propeller... Accounting MCQs | Accounting MCQs

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?

Lucy. Sally.Marcy.Patty.Show Result

Correct - Your answer is correct.

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Detailed Answer

Answer (B) is correct. The learning curve reflects the increased rate at which people perform tasks as they gain experience. The time required to perform a given task becomes progressively shorter. One common assumption in a learning curve model is that the cumulative average time per unit is reduced by a certain percentage each time production doubles. Therefore, for Sally, if the first unit required 60 hours to complete, her average completion time after two units will be 42 hours (70% × 60 hours). If production is doubled to 4 units, her average completion time will be 29.4 hours (70% × 42 hours). When production is then doubled to 8 units, her average completion time will be 20.6 hours (70% × 29.4 hours). This is the best among the four workers.