D. Midway through the project your design and production people realize that a 75 percent improvement curve is more appropriate. What cost savings do you expect (neglect profit)

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NSDC has a contract to produce 7 satellites to support a worldwide telephone system (for Alaska Telecom, Inc.) that allows individuals to use a single, portable telephone in any location on earth to call in and out. NSDC will develop and produce the 7 units. NSDC has estimated that the R&D costs will be NOK (Norwegian Krone) 12,000,000. Material costs are expected to be NOK 7,000,000. They have estimated the design and production of the first satellite will require 100,000 labor hours and a(n) 75 percent improvement curve is expected. Skilled labor cost is NOK 300 per hour. Desired profit for all projects is 20 percent of total costs.

42022.34

Explanation:

On the new discovery using the formula

T(N) = T( N^log(L)/log(2) ) to calculate labor hours

T = 100000 , N = 1  then labor hours = 100000

T = 100000 , N = 2 then labor hours = 70000

T = 100000, N = 3 then labor hours = 56818.03

T = 100000, N = 4 then labor hours = 49000

T = 100000, N = 5 then labor hours = 43684.64

T = 100000, N = 6 then labor hours = 39772.62

T = 100000, N = 7 then labor hours = 36739.67

Total of labor hours = 396014.97

Therefore the cost savings to except = 438037.3031 - 396014.97 = 42022.34

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