A new type of lithium-ion motorcycle battery has been created by Power Corporation for motorcycles. The first battery is expected to take 35 minutes to create, but the company anticipates an 85 percent learning curve for the first eight units. Labor costs $80 per hour on average. Materials and other variable overheads are estimated to cost $40 per unit. The company will price each battery by adding a 55 percent mark-up to the total variable costs per cell, with labor expenses based on the average time to create the last four batteries.
Requirements C, D, and E are covered by the following information.
The lithium-ion battery's initial phase of production has now been finished. The first unit took 40 minutes to complete, and the first eight units took an average of 15.77 minutes to complete, indicating that the learning effect had ended. The price will be adjusted by Lith00123 to reflect the real average time it took to complete the last four units.
Calculate the price Lith00123 expects to charge for its new lithium-ion battery using the cumulative-average time model (the price for labor per battery is based on the average time it takes to produce the last four units).