a) Captain Nemo, owner of the Suboptimum Underwater Boat Company (SUB), is puzzled. He has a contract for 11 boats and has completed 4 of them. He has observed that his production manager (Mr. P.M.) has been reassigning more and more people to torpedo assembly after the construction of the first four boats. The first boat, for example, required 225 workers, each working a 40-hour week, while 45 fewer workers were required for the second boat. Mr. P. M. has told them that "this is just the beginning" and that he will complete the last boat in the current contract with only 100 workers!
Mr. P. M. is banking on the learning curve, but has he gone overboard? In other words, is Mr. P. M. correct in his estimation of the number of workers required to finish the last boat?
b) SUB has produced the first unit of a new line of minisubs at a cost of $500,000 ($200,000 for material and $300,000 for labor). It has agreed to accept a 10 percent profit, based on cost, and it is willing to contract on the basis of a 70 percent learning curve. What will be the contract price for first three minisubs?