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FOREVER Company plans manufacture a product called JOY which requires a substantial amount of direct labor on each unit. Based on the company's experience with other products that required similar skill, management believes that there is a learning factor in the production process used to manufacture this product.

Each unit of JOY requires 50 squares feet of raw materials at a cost of P30 per square foot for a total materials cost of P1,500, the standard direct labor rate is P25 per hour. Variable factory overhead assigned to product at a rate of P40 per direct labor hour. The company adds a markup of 30% on variable manufacturing cost in determining an initial bid price for all products.

Data on the production of the first two lots (16 units) of JOY are as follows:

a. the first lot of 8 units required a total of 3,200 direct labor hours.

b. the second lot of 8 units required a total of 2,560 direct labor hours.

Based on prior production experience, the company anticipates that there will be no significant improvement in production time after the first 32 units. Therefore, a standard for direct labor hours will be established, based on the average hours per unit for units 17through 32.

REQUIRED:

a. Based on the data presented for the first 16 units, what learning rate appears to be applicable to the direct labor required to produce JOY?

b. Calculate the standard for direct labor hours that the company should establish for each unit of JOY

c. After the first 32 units were manufactured, the company was asked to submit a bid on an additional 96 units. What price should the company bid on this order of 96 units?

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