The labor cost to produce a certain item is $ 8.50 per hour. Job setup costs $ 50 and material costs are $ 20 per unit. The item can be purchased for $ 88.50 per unit. The learning rate is 90 percent. Overhead is charged at a rate of 50 percent of labor, materials, and setup costs.
a. Determine the unit cost for 20 units, given that the first unit took 5 hours to complete.
b. What is the minimum production quantity necessary to make production cost less than purchase cost?