Cost Forecasting
Dorothy Gale, a quality-control supervisor for Wizard Products, Inc., is concerned about unit labor cost increases for the assembly of electrical snap-action switches. Costs have increased from $80 to $100 per unit over the previous 3 years. Gale thinks that importing switches from foreign suppliers at a cost of $115.90 per unit may soon be desirable.
A. Calculate the company's unit labor cost growth rate using the constant rate of change model with continuous compounding.
B. Forecast when unit labor costs will equal the current cost of importing.