Question - Lee Corp. is looking to introduce a new product with an 80% cumulative learning curve for production batches of 500 units. The variable production and selling costs, all subject to learning, are $20 per unit for the first 1,000-unit batch. There are $15,000 in fixed costs not subject to learning.
1. What is the average cost per unit at a production level of 2,000 units?
a. $18.20
b. $23.50
c. $26.40
d. $32.60
2. If the Lee Company can sell all it produces for $20 per unit, what is the profit or loss at a production and sales level of 4,000 units?
a. No profit or loss
b. $13,800 profit
c. $24,040 profit
d. $10,350 loss