homework AA

ENGR 610

FALL SEMESTER 2020

HOMEWORK # 1

You are the production engineer at a Company which five years ago used to manufacture boilers rated at 30,000 Btu/hr. Market research indicates that there is a considerable new market segment for larger boilers, in the range of 40,000 to 60,000 Btu/hr. The General Manager of the Company wants to take a segment of the new market and asks you to estimate today’s production cost (includes material and labor) per unit, at inception of production and during operation as the number of produced units increases, for a new line of boiler rated at 50,000 Btu/hr.

You collect the following data:

1. Material cost per 30,000 Btu unit five years ago $ 1,000

2. Material Index 5 years ago 140, today 190

3. Power sizing Exponent 0.75

4. Labor cost per mhr five years ago $ 50.00

5. Cost of Labor Index five years ago 130 and today 190

6. Estimate of Production Time for first Unit 100 manhours

7. Estimate of Learning Curve Rate 80%

Hint:

1. Calculate the material cost today for a 50,000 Btu unit

2. Calculate the cost of labor today (i.e. $/mhr)

3. Calculate the learning curve exponent

4. Plot the cost per unit produced as a function of the number of produced units up to 25 units