Question

YYY has the following cost data for a Toy helicopter it just produced

Direct Material per unit	$1,000
Direct Labor	100 hours @ $8 per hour
Variable Overhead	100 hours @ $2 per hour
Total Cost	$2,000

The company sold the Helicopter for $2,500.

(round all your answers)

1. The company has just received another contrast for another Helicopter. Assuming that the company is planning to use 80% cumulative Average learning model, what would be the time taken by the second Helicopter?

100 Hours

90 Hours

80 Hours

60 Hours

2. The Company has just received a contract from the defense department to supply 16 Helicopters on a cost plus 50% basis. What would be the total payment made for 16 Helicopters to XYZ using the Cumulative Average Model?

$39,750

$33,830

$22,555

$26,500

Answer 1

Answer for 1)

My answer is option 80 hours.

Working:

Here, it is given that the company planning to use 80% cummulative average learning model=100 hours×80%

=80 hours.

Answer for 2)

My answer is option $33830.

Working:

Alternatively formula can be used based on the options this way is producing more accurate result.

Here the time taken for first two =

100 hours×80%×2=160 hours

Time take for first for=80% of time taken tome taken for first two=160 hours ×80%×2=256 hours

Similarly for first 8=

256 hours×80%×2=409.6 hours

Similarly for first 16=

409.6×80%×2=655.36 hours

Total cost=direct material+direct labour+variable overhead

[(16 units×$1000)+(655.36 hours×$8)+(655.36×$2)]

=$22553.6

Total payment=

$22553.6×150%=$33830 (approx.)