Jack Simpson contract negotiator for Nebula Airframe Company

Jack Simpson, contract negotiator for Nebula Airframe Company, is currently involved in bidding on a follow-up government contract. In gathering cost data from the first three units, which Nebula produced under a research and development contract, he found that the first unit took 2,500 labor hours, the second took 1,625 labor hours, and the third took 1,530 hours.

In a contract for three more units, how many labor hours should Simpson plan for? (Round your answer to the nearest whole number.)

Solution

Time taken for the first unit = 2500 hours

Time taken for the second unit = 1625 hours

So, learning rate = 1625/ 2500 = 65%; so, learning coefficient = log(0.65)/log(2) = -0.62149

So, the Learning curve equation becomes, T_N = 2500 x N^-0.62149

So, T4 = 2500 x 4^-0.62149 = 1056.25; T5 = 2500 x 5^-0.62149 = 919.45; T6 = 2500 x 6^-0.62149 = 820.97

Total time to be planned = 1056.25 + 919.45 + 820.97 = 2797 labor-hours.