Pond Engineering Company (PEC) is an expert in designing and producing high-powered
pumps. In June 2021, they received a contract from Atkinson Company (ATCO) to build two
pumps with specific requirements.
The first unit took 2480 engineering working hours and cost $33580 in materials and
equipment usage. The second unit took 2108 engineering working hours and cost $31901 in
materials and equipment usage. PEC pays $34 per hour for Engineering working.
The total cost is the sum of engineering working hours cost and cost of materials and
equipment usage. After receiving the first order, ATCO was very impressed with the quality of
work and meeting the requirements about the pumps. Therefore, they placed the following
orders after receiving the first order.
Order # Order Size (Units)
Assume the same learning continues. ATCO now approached PEC and asked to submit a bid
for producing 14 units of high-powered pumps.
a. What was the cost of the last unit of fourth-order?
b. What will be the cost of the last unit of the follow-on contract of 14 high-powered pumps?
c. What will be the average engineering hours required for the follow-on contract of 14
d. What will be the average total cost of the follow-on contract of 14 high-powered pumps?
e. PEC completed and delivered the follow-on contract of 14 units of high-powered pumps.
After that, they released their labor and equipment to other projects. After a long time,
ATCO has now approached another order of 30 units of their specific high-powered
pumps. Suppose there was a significant delay between the last follow-on contract of 14
units and this order. The PEC engineering hours rate increases from $34 to $39 per
hour, and the cost of material increases by 20%. Calculate the price of this new order of
30 units with the following assumptions:
e-i) Under the assumption that learning continues from the previous orders.
e-ii) Under the assumption that learning didn’t continue and they forgot due to the
significant delay between orders.