Cost Management 6th Edition by Edward Blocher,David Stout ,Paul Juras,Gary Cokins

Exercise 41

Learning Curves The Air Force Museum Foundation has commissioned the purchase of 16 Four F Sixes, pre-World War II aircraft. They will be built completely from scratch to the exact specifications used for the originals. As further authentication, the aircraft will be made using the technology and manufacturing processes available when the originals were built. Each of the 16 will be flown to Air Force and aviation museums throughout the country for exhibition. Aviation enthusiasts can also visit the production facility to see exactly how such aircraft were built in 1938.
Soren Industries wants to bid on the aircraft contract and asked for and received certain cost information about the Four F Sixes from the Air Force. The information includes some of the old cost data from the builders of the original aircraft. The available information is for the total accumulated time as the first, eighth, and thirty-second aircraft, respectively, were completed. The data reflect a learning rate of 90%.
Required
1. If Soren Industries expects that the manufacturing time will be the same as it was in 1938, how many hours will it take to build the 16 aircraft for the Air Force Museum Foundation
2. What is the role of learning curves in Soren Industries' business for contracts such as this