Cost Effects of a Change in Production Rate.
Final rept. Aug-Oct 96,
INSTITUTE FOR DEFENSE ANALYSES ALEXANDRIA VA
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Several IDA representatives visited the China Institute of Aeronautic Systems Engineering in October 1996 with the purpose of providing the Institute with an estimate of the cost to produce an 100-passenger aircraft. As a way of strengthening IDAs relationship with the Institute during the visit, IDA delivered a lecture on cost estimating and analysis. This document is an annotated version of that lecture. It gives background information on the areas of research IDA pursues before focusing attention on the area of cost analysis. The cost effects of production rate changes serves as an example. The problem is illustrated using the simple example of a 6-year system acquisition program about to begin its third year. The problem is to estimate the annual costs of two alternative programs, one that accelerates the production rate and one that stretches it. The solution involves separating costs into their fixed and variable components before estimating the variable costs for the new program and allocating fixed costs. Before solving the problem, the lecturer gives a short tutorial on cost progress curves.
- Commercial and General Aviation
- Economics and Cost Analysis
- Manufacturing and Industrial Engineering and Control of Production Systems