Q Organisation, BPP Kit

Hi 🙂

It’s the part b, that is bothering me.. it says…..

b) Market research has discovered that the price demand relationship for the item during the launch phase will be as follows:

Price $ Demand- Units
100 10,000
80 20,000
69 30,000
62 40,000

Production of the DVD recorder would occur in in batches of 10,000 units and the production director believes that 50% of the variable cost would be affected by a learning and experiencing curve. This would apply to each batch produced and continue at a constant rate of learning up to a production volume of 40,000 units when the learning would be complete. Therafter, the unit variable manufacturing cost of the product would be equal to the unit cost of the fourth batch. The production director estimates that the unit variable manufacturing cost of the first batch would be $60 ($30 of which is subject to the effect of the learning and experience curve, and $30 of which is unaffected), whereas the average unit variable manufacturing cost of all four batches would be $52.71.

Calculate rate of learning.

What I don’t get is how they calculated the rate of learning.

What they did is, 30r2(square)= 22.71 ($52.71-$30)

Why did they take r2? I don’t get the logic behind that.

Thanks in advance.