Suppose that you are the estimator who is assigning costs to a major project to be undertaken this year by your firm, Acme Software Developers. One particular software development process involves many labor-hours, but the work is highly redundant. You anticipate a total of 100,000 labor-hours to complete the first iteration of the software development process and a learning curve rate of 80%. You are attempting to estimate the cost of the tenth iteration of this repetitive process. Based on this information and a $60 per hour labor rate, what would you expect to budget as A. The cost of the tenth iteration? B. The cost of the twentieth iteration?

 Mar 12, 2019

\(\text{The 80% learning curve rate means that the cost of each successive iteration }\\ \text{is 80% of the previous while the cumulative output doubles.}\\ C(n)=(0.8)^{n-1}C_1\\ C_1=\$60/hr \cdot 100000hr = \$6\times 10^6\\ C(10) = \$6\times 10^6 \cdot (0.8)^{10} = \$644245.09\\ \text{You do the 20th iteration}\)

 Mar 12, 2019

19 Online Users