Production Rate and Weapon System Cost: Research Review, Case Studies, and Planning Model.

Recent experience has shown that production rates for weapons systems are subject to continual adjustment. Parametric cost estimates have usually depended on physical parameters and on cumulative quantity, but not on rate. This study consists of three parts-a review of existing research, a number of case studies, and a suggested cost model for estimating the cost impact of production rate changes. The conclusions that could be drawn from existing research were seen to be quite limited. No cost models were found that seemed suitable for use by budget planners in evaluating production rate effects. The case studies gave further insight into the factors having the greatest cost impact under rate changes. The cases supported the belief that the most important contributor to increased unit costs under stretch-out is an increased overhead allocation and that labor inefficiences are usually of minor significance. The proposed cost model derives from a non-linear variation of cost-volume-profit analysis and is consistent with the principal empirical findings. (Author)