Question

# YYY has the following cost data for a Toy helicopter it just produced Direct Material per...

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.

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

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.

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.)

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