21
60.
CSO: 1B3b
LOS: 1B3e
Propeller Inc. plans to manufacture a newly designed high-technology propeller for airplanes.
Propeller forecasts that as workers gain experience, they will need less time to complete the job.
Based on prior experience, Propeller estimates a 70% cumulative learning curve and has projected
the following costs.
Cumulative number
Manufacturing Projections
of units produced
Average cost per unit
Total costs
1
$20,000
$20,000
2
14,000
28,000
The estimated cost of an order for seven additional propellers, after completing production of the
first propeller, would be
a.
$34,880.
b.
$54,880.
c.
$92,000.
d.
$98,000.
61.
CSO: 1B3c
LOS: 1B3g
Johnson Software has developed a new software package.
Johnson’s sales manager has prepared the
following probability distribution describing the relative likelihood of monthly sales levels and
relative income (loss) for the company’s new software package.
Monthly Sales
In Units
Probability
Income (Loss)
10,000
.2
$(4,000)
20,000
.3
10,000
30,000
.3
30,000
40,000
.2
60,000
If Johnson decides to market its new software package, the expected value of additional monthly
income will be
a.
$23,200.
b.
$24,000.
c.
$24,800.
d.
$25,000.1B4a