Lazer Technologies Inc. (LTI) has produced a total of 20 high-power laser systems that could be used to destroy any approaching enemy missiles or aircraft. The 20 units that have been produced were funded in part as private research within the research and development arm of LTI, but the bulk of the funding came from a contract with the Department of Defense (DOD).
Testing of the laser units has shown that they are effective defense weapons, and through redesign for portability and easier field maintenance, the units could be truck-mounted. DOD has asked LTI to submit a bid for 100 units. The 20 units that LTI has built so far cost the following amounts and are listed in the order in which they were produced.
a) Compute the logarithms (use natural logs) of the numbers in each column (ln(cost) vs. ln(unit no.)) and plot the values using logarithmic scale to make estimates.
b) Using an exact least squares fit of the logarithms, estimate a and b. What is the appropriate learning curve that fits these data? Based on this past history, what is the rate of learning?
c) What bid should LTI submit for the total order of 100 units, assuming the learning continues?
d) What is the cost expected to be for the last unit under the learning rate you estimated?