You’ve just received ten units of special sub assembly from the electronics manufacturer at a price of $250 per unit. A new order has as well just come in for your computer's product that uses such sub assemblies, and you wish to buy 40 more to be shipped in lots of ten units each. (The sub assemblies are hulking and you require only 10 a month to fill your new order.)
A. Supposing a 70% learning curve by your supplier on similar product last year, how much must you pay for each lot? Suppose that the learning rate of 70% applies to each lot of 10 units, not each unit.
B. Assumes you’re the supplier and can product 20 units now, however can’t start production on the second twenty units for two months. What price would you strive to negotiate for the last 20 units?