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The upholstery and assembly process will be subject to a learning effect as the workers get
used to the new design. BCC estimates that the first chair will take two hours to prepare but
this will be subject to a learning rate (LR) of 95%. The learning improvement will stop once
128 chairs have been made and the time for the 128th chair will be the time for all
subsequent chairs. The cost of labour is $15 per hour.
The learning formula is shown on the formula sheet and at the 95% learning rate the value
of b is –0.074000581.(a) Calculate the average cost for the first 128 chairs made and identify any cost gap that
may be present at that stage.
ans : The average cost per chair is 1.396674592 × $15 = $20.95i wanted to ask that if question said to calculate average cost of per unit chair ,we would have calculated the cost of 127 chairs and 128 chairs and subtracted to come up with cost of 128th and multiplied by rate, right? but since here they have asked about first 128 we will use the cumulative time for 128 chairs . is this the logic?
The formula always gives the average cost per chair of all the chairs made.
If we wanted the total cost of 128 chairs we would multiply the average cost per chair by 128.
If we wanted the cost of the 128th chair, we would subtract that total cost of 127 chairs from the total cost of 128 chairs.
Have you watched my free lectures on learning curves?
CIM (DECEMBER 2015)
b) Discuss whether ROI is providing a fair basis for calculating the managers’ bonuses and
the problems arising from its use at CIM Co for the year ended 31 August 20X5.PART I Dont understand:
This is largely attributable to the fact that Division N invested $6.8m in new equipment during the year. If this investment had not been made, net assets would have been only $10.04m
and the ROI for Division N would have been 19.62%.
a)
cap employed 16840
Controllable profit 1970
ROI % 11.70Division N invested $6.8m in new equipment.
can you explain the capital employed if they didnt invested. I dont understand that if they hadn’t invested, non current assets will decrease by 6.8m right? but what about cash? won’t it increase ?
how did they come up with cap emp ans
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