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CMA Final · Strategic Cost Management · Learning Curve

Kavya Aerospace Pvt. Ltd. wins an order for 8 units. The first unit takes 1,000 hours and an 80% cumulative average curve applies. Labour is Rs 200 per hour and materials are Rs 30,000 per unit. The firm had already built 4 units. What is the cost (labour plus materials) of the next 4 units, units 5 to 8?

The cost is Rs 4,27,200. Cumulative time for 8 units is 4,096 hours and for 4 units is 2,560 hours, so units 5 to 8 need 1,536 hours, costing Rs 3,07,200 in labour. Adding Rs 1,20,000 of materials gives Rs 4,27,200.

  1. ARs 4,27,200Correct
  2. BRs 5,29,600
  3. CRs 3,07,200
  4. DRs 6,32,000

Explanation

The 4-unit average is 1,000 × 0.64 = 640 hours, so the total is 2,560 hours. The 8-unit average is 512 hours, so the total is 4,096 hours. Units 5-8 take 1,536 hours × 200 = Rs 3,07,200, plus materials of 4 × 30,000 = Rs 1,20,000, which gives Rs 4,27,200. Rs 3,07,200 omits materials; Rs 5,29,600 uses the 8-unit average for four units.

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