The Effects of Different Production Rate Measures and Cost Structures on Rate Adjustment Models

Dan C. Boger and Shu S. Liao
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Dan C. Boger: Naval Postgraduate School
Shu S. Liao: Naval Postgraduate School

A chapter in Cost Analysis and Estimating, 1990, pp 82-98 from Springer

Abstract: Abstract The effect of production rate on the cost of weapon systems has attracted much attention in the cost estimating community in recent years. A variety of adjustments to weapon systems cost models have been proposed to reflect the impact of different production rates. The most popular solution is to add a rate term to the traditional learning curve model. This paper examines the effects of different rate measures and cost structures on rate adjustment models. Numerical examples illustrate that the production rate term should be measured as a ratio and not as an absolute quantity of a production lot or a period. The paper also points out that a rate adjustment model is appropriate only with data collected from plants which have not undergone changes in cost structure.

Date: 1990
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-1-4612-0995-9_4

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DOI: 10.1007/978-1-4612-0995-9_4

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