Since it is a prototype and things can go wrong and

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cost is added to the price. Since, it is a prototype and things can go wrong and cost can fluctuate an approximation to the final price is made. Also other costs such as testing, shipping box and final shipping and handling costs might not have been considered in this calculation. It should be noted that if this project goes beyond the prototype phase on to final production the cost will go down a lot considering production units will be much higher than the initial prototype cost. D. A decrease in the improvement curve means the total labor hours will decrease so the labor hours to build the prototypes will decrease meaning the prototypes can be finished and delivered before the promised delivery date. The cost of labor will decrease meaning more profit for the project, however it might not be as significant compared to the final selling price. Page | 5
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HW3 IE5541 Sunny Ahmed E. Since this has already been built there will not be anymore R&D cost. Although material cost is not linear in this case if we consider it to be linear then material cost for 4 should be 3,000,000. At 75% improvement curve for 4, the total labor hours will be 100,000 will be 2.946 x 100,000 = 29,460 hours. Therefore total labor cost will be 29460 x 300 = 88,38,000 NOK. Direct cost = 88,38,000 + 3,000,000 = 1,1838000 NOK Total Direct cost = 1,18,38000 + (1,18,38000 x 15%) = 1,36,13700 NOK Total cost including G&A = 1,36,13700 + (1,36,13700 x 15%) = 1,56,55,755 NOK Total sale price at 25% profit = 15655755 + (15655755 x 25%) = 19569693.75 NOK Therefore approximate sale price would be 1,96,00000 NOK for 4 more satellites after the prototype run. Page | 6
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