Engineering Economic Analysis

Estimating Models 49

time is given. Steady state is the time at which the physical constraints of performing the

task prevent the achievement of any more learning or improvement.

Estimate the overall labor cost portion due to a task that has a learning-curve rate of 85% and

reaches a steady state value after 16 units of 5.0 minutes per unit. Labor and benefits are $22 per

hour, and the task requires two skilled workers. The overall production run is 20 units.

SOlUTlQN

Because we know the time required for the 16thunit, we can use Equation 2-4 to calculate the

time required to produce the first unit.

Tl6=Tl X 16Iog0.85/log2.0

5.0 =TI X 16-0.2345

TI- 9.6 minutes

;;

Now we use Equation 2-4 to calculate the time requirements for each unit in the production run

as well as the total production time required.

=The foral ctTmulativetime oftKe proctuctioniim is ~119.8minutes (2.01ours). Thus the total

labor cost'~stimate would be:,<

2.0 hours x $22/hour per worker x 2 workers=$88

If we ignot~ the learning-cu~v~effect and c~cul'!t~the lilQprcost portion based only,on tbe steady

state labotH:ate,tbe estip.1atewould be

0.083 hours/unit x 20 units x $22/hour per worker x 2 workers=$73.04

.I This estiIIl'£lteis understated by about 20% from what the true cost would be.
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~ ,s:~~~~Jjc"",~~~~-~ ~?..J:~~~i-i:~~':';:_~~;"'-"'~-:"'~£;~i..i'i:';~~~j.~.'~;.,.~-. ~.'- ::-.~- __000._- .~~~

, TN =9.6 XN-0.2345

Unit Time (min) Cumulative Unit Time (min) Cumulative

Number, to produce Time from Number, to produce Time from

N NthUnit ltoN N NthUnit ltoN

1 9.6 9.6 11 5.5 74.0

2 8.2 17.8 12 5.4 79.2

3 7.4 24.2 13 5.3 84.5

4 6.9 32.1 14 5.2 89.7

5 6.6 38.7 15 5.1 94.8

6 6.3 45.0 16 5.0 99.8

(^7) 6.1 51.1 = (^1750) ;; lQ1.8" ;:
'8
':;
5'.9 57.0
:;;;:
18 5.0 109.8
9 5.7 62.7 19 5.0 114.8
10 5.6 68.3 20 5.0 119.8