PWR is a manufacturing company that is about to launch a new product: Product Z. Details of the variable costs incurred in producing one unit of Product Z are as follows:
Labour $25 per hour
Materials $52 per unit
Variable overheads $5 per labour hour
Learning curve Product Z is produced in batches of 10 units. The first batch of 10 units is expected to take 15 labour hours. There will be 95% learning curve that will continue until 64 batches have been produced.
Note: The learning index for a 95% learning curve = -0.074
Required:
(a) (i) Calculate the time required to produce the 64th batch of Product Z.
(ii) Calculate the total variable cost of the 64th batch of Product Z.
(b) Explain THREE conditions that must exist in the production process of Product Z for the learning curve effect to be realised.