You are in charge of a large assembly shop that specializes in contract assignments. One of your customers has promised to award you a large contract for the assembly of 16 units of a new product. The suggested bid price in the contract is based on an average of 24 hours of direct labour per unit. You conduct a couple of test assemblies and find that, although the first unit took 50 hours, the second unit could be completed in just 40 hours.
a. What is the learning rate, L? What is the revised progress rate, i? How many hours do you expect the assembly of the third unit to take? How many hours do you expect the assembly of the 16th unit to take? Calculate the percentage change in productivity between the 1st and the 16th unit.
b. What is the total amount of hours to assemble the 16 units? What is the average time to assemble each of the 16 units? Is the contract's assumption about the average labour hours per unit valid or should the bid price be revised?