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CMA Final · Strategic Cost Management · Learning Curve

Rohan Machines builds an order of 8 special presses. The first press needs 1,000 labour hours and an 80% cumulative average time curve applies. Labour costs Rs 50 per hour. What is the labour cost of presses 5 to 8?

The labour cost of presses 5 to 8 is Rs 76,800. Total time for eight presses is 4,096 hours and for four presses 2,560 hours, so the last four take 1,536 hours. At Rs 50 per hour this gives Rs 76,800.

  1. ARs 76,800Correct
  2. BRs 1,28,000
  3. CRs 1,02,400
  4. DRs 2,04,800

Explanation

Average for 4 presses = 640 hours, total 2,560. Average for 8 presses = 512 hours, total 4,096. Presses 5-8 take 4,096 - 2,560 = 1,536 hours, costing 1,536 x 50 = Rs 76,800. Rs 1,28,000 is the cost of the first four presses, and Rs 2,04,800 is the cost of all eight.

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