Question

# Marshall Co. produced a pilot run of eighty units of a recently developed piston used in...

Marshall Co. produced a pilot run of eighty units of a recently developed piston used in one of its products. Marshall expected to produce and sell 1,950 units annually. The pilot run required an average of 0.55 direct labor hours per piston for 80 pistons. Marshall experienced an ninety percent learning curve on the direct labor hours needed to produce new pistons. Past experience indicated that learning tends to cease by the time 1,280 pistons are produced.

Marshall's manufacturing costs for pistons are presented below.

 Direct labor \$ 12.00 per direct labor hour Variable overhead 8.00 per direct labor hour Fixed overhead 10.00 per direct labor hour Materials 5.00 per unit

Marshall received a quote of \$7 per unit from Kytel Machine Co. for the additional 1,870 needed pistons. Marshall frequently subcontracts this type of work and has always been satisfied with the quality of the units produced by Kytel.

If the pistons are manufactured by Marshall Co., the average direct labor hours per unit for the first 1,280 pistons (including the pilot run) produced is calculated to be (use five decimal places in calculating the average time):

Multiple Choice

• 0.34484.

• 0.34966.

• 0.36086.

• 0.36614.

• 0.38355.

 Reduce time to 90% each time that units double. Size Average time Total Time 80 0.55 44 160 0.495 79.2 320 0.4455 142.56 640 0.40095 256.608 1280 0.36086 461.8944 Average direct labor hours per unit for the first 1280 pistons. 0.36086 Answer

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