Question

Consider the preparation of income tax statements. The process starts with an initial cost c(1) = 45 and a learning rate of LR = 0.95, and by now has reached a cumulative output of 100. Using the LCC method, what unit costs do you expect for the 100th unit?

Answer 1

The unit cost will be $32

Step-by-step explanation:

The formula is given as

Cn = C × n^(b)

Where,

Cn = Unit cost at nth unit =100th

C = unit cost of first unit = $45

n = unit = 100

b = learning curve = log(LR)/log2 = log(0.95)/log2 = -0.074

Cn = 45 × 100^(-0.074) = $32