Problem
Spooner Inc. makes custom, handmade sailboats. A renowned sailing team issued a contract to make 50 custom, identical sailboats. The first unit is estimated to require 4,000 man-hours to complete.
a. Assuming a historical learning curve of 75%, what is the average amount of time to make each unit?
b. Spooner, Inc operates on a standard 8 hour shift, 5 days a week. They have 15 full time direct labor employees making sailboats. If all 15 are dedicated to completing this contract, how many days will the contract take?
c. Spooner Inc's overhead rate is 2.25 indirect employees to 1 direct employee. The average hourly billable rate for direct employees is $20. The average hourly billable rate for indirect employees is $35. What will the total labor bill for this contract be?
d. The average hourly internal rate for direct employees is $15. The average hourly internal rate for indirect employees is $28. What will the total labor cost, to Spooner Inc, for this contract be?
e. How much profit will Spooner Inc make from the labor portion of this contract?