Q1 (LEARNING CURVES). You own a car body/paint repair shop. You have been asked to submit a bid to repair ten (10) identical cars from a dealer lot that were all similarly damaged by a hail storm.

Each car requires a new hood, roof, decklid, and total repainting. You estimate that the material costs for each car are $3,000.00. You also estimate that 50.00 labor hours are needed to repair/repaint the first car. The value of your labor is $110/hour.

Part A.) If there is no learning curve, what is the lowest total bid (for 10 cars) you should submit if you charge a 25% markup on material and you wish to recoup all your costs?

Part B.) From similar orders in the past, you estimate that there is a 90% learning curve for this type of work. Using this information, what is the lowest total bid (for 10 cars) you should submit if you charge a 25% markup on material and you wish to recoup your labor costs?

Part C.) Your potential customer is receptive to your bid (from part b) but is a little hesitant to award you the order because he thinks the average price per car that you bid is 5.0% too high.

You respond to the customer that if they would increase their repair order from 10 cars to x cars, you could reduce your average price per car by 5.0%. What is x, the new order quantity that would permit you to reduce your per-car cost by 5.0%?