Factors Affecting the Unit Cost of Weapon Systems
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OH SCHOOL OF LOGISTICS AND ACQUIS ITION MANAGEMENT
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This research identifies variables and specifies equations that can be used to estimate the unit production cost of a weapon system. It is concerned with both explanation and prediction. Three major variables identified are cumulative quantity, production rate, and change in regime. Cumulative quantity is used in learning curve theory. Production rate is found in the U-shaped short and long-run cost curves of economic theory. This study uses the term regime to refer to any major change in the production environment of a weapon system. This research attempts to integrate the use of these three variables. A change in regime may be due to a change in acquisition strategy, configuration, or manufacturing method. It is recommended that a categorical variable be used to capture the effect of a change in regime. Several specific equations are proposed and discussed. In general, they entail a shift, shift and rotation, or shift and two rotations of the cost quantity rate surface due to a change in regime. Many accepted methods of integrating learning and rate do not produce U-shaped rate curves this study suggests one that does. Principles and equations discussed are applied in modeling the cost history of three missile systems.
- Economics and Cost Analysis
- Logistics, Military Facilities and Supplies