The Desert Company, which is under contract to the Nissan, assembles machine parts. As part of its research program, it completes the assembly of the first of a new model X of machines. The Nissan is impressed with the X It requests that Desert Company submit a proposal on the cost of producing another eight of X Desert reports the following cost information for the first X assembled and uses an cumulative averagetime learning model as a basis for forecasting direct manufacturing laborhours for the next eight X
Direct labor hours to manufacture the first X hours part
tableDirect labor cost per hour,$Per hourOverhead cost per hour,$Per hourDirect material cost,$Per unit
Required:
Calculate predicted total costs of producing and units of model under cumulative approach.
Calculate predicted total costs of producing and units of X under incremental approach.
Analyze the difference between cumulative and incremental methods when the company produces and units of X
