Barretta Ltd is a manufacturer of racing powerboats. It has designed a new racing boat called the Powerline 3 and expects to produce it in a continuous operation over an 18 month period.
During this period, it is expected that a total of sixteen Powerline 3's will be produced and sold. The production of the boat is a labour intensive operation and units are produced one after another.
The costs of producing the first boat are as follows:
Skilled Labour - 1,200 hours at a rate of £40 per hour
Unskilled Labour - 1,800 hours at a rate of £30 per hour
Materials - £75,000
Overheads - £30 per labour hour worked (total of Skilled and Unskilled)
It is known that in producing any product, Skilled Labour usage experiences an 80% learning curve effect and Unskilled Labour usage experiences a 90% learning curve effect.
Baretta Ltd has decided to set the selling price per unit of the Powerline 3 by using the full cost plus method of pricing, with a profit mark up of 30%
(a) Calculate the minimum selling price of
(i) the first unit of the Powerline 3.
(ii) the second unit of the Powerline 3
(iii) the first 16 units of the Powerline 3 if ordered together (35 marks)
(b) Identify the method of setting the selling price that Champions Ltd has chosen. Explain how the learning curve model will affect the calculations for that selling price. (10 marks)
(c) Barretta Ltd Ltd also produce a further powerboat Ripper, which has been in production for a number of years, and to date 492 units of Ripper have been produced. The budget for the next quarter is showing the production of 75 units of Ripper. If the 1st ever unit took 900 hours and an 80% learning curve applies, calculate.
(i) the total labours hours needed for the production of the 75 units of Ripper.
(ii) the average labour time per unit
(iii) explain where this information may be used by Barretta Ltd Ltd
Note: the learning co-efficient of 80% is -0.322
can you give me the proccess and answer, thank you
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