The labor cost to produce a certain item is $8.50 per hour. Job setup costs $50 and material costs

are $20 per unit. The item can be purchased for $88.50 per unit. The learning rate is 90 percent.

Overhead is charged at a rate of 50 percent of labor, materials, and setup costs.


a. Determine the unit cost for 20 units, given that the first unit took five hours to complete.

b. What is the minimum production quantity necessary to make production cost less than purchase cost?