Cost Analysis
1. Initial Data

Initial Order (Q1): 100 units

Initial Labor Hours: 4 hours per unit

Learning Rate (LR): 80% (based on 75% labor-paced and
25% machine-paced)

Labor Rate: $11.50 per hour

Material Cost: $100.00 per unit

Overhead: 100% direct labor

Profit: 25% of total cost
2. Calculate Hours for the New Total Quantity
Cumulative Total (Q2) = 100 + 200 = 300 (units)
According to the Wright Curve:
Where:

Y = Cumulative average hours for X units

A = Hours for the first unit (or first lot)

X = Cumulative units

b = Learning index = log (LR) \ log (2) = log (0.8) \log (2)= 0.3219
The average hours for the first 100 units Y(100) =4 hours
 The average hours for the first 300 units Y(300) :

2,8 hours
3. Calculate Labor Hours for an additional 200 units
 Total hours for 300 units = 300*2.8 = 840 hours
 Total hours for 100 units = 100*4.0 = 400 hours
 Total hours for the next 200 units = 840- 400 = 440
hours
 Average hours per unit for the new 200 units =
440\200=2.2 hours
Cost Component
Caculation
Amount
Material Cost
Fixed
$100
Labor Cost
11.5*2.2
$25.3
Overhead
100% of labor
$25.3
150.6*25%
$37.65
Total cost
$150.6
Profit(25%)
Total unit price
$188.25