12.2 Learning Curve Analysis

Question 1

A company experiences a cumulative learning curve of 75% on the manufacturing of a particular electrical product. It takes 100 hours to make the first 500 units. How many hours will it take to make 2,000 units in total?

A. 250.00
B. 231.25
C. 225.00
D. 300.00

Answer 1

C. 225.00

The effects of the company’s projected learning curve of 75% can be calculated as follows:
Batch 1
Cumulative units produced: 500
Cumulative Average Batch Time: 100
Cumulative Total Time: 100 (1 × 100)
Batch 2
Cumulative units produced:1,000
Cumulative Average Batch Time: 75 (100 × 75%)
Cumulative Total Time: 150 (2 × 75)
Batch 4
Cumulative units produced: 2,000
Cumulative Average Batch Time: 56.25 (75 × 75%)
Cumulative Total Time: 225 (4 × 56.25)

It will take 225 hours to produce 2,000 units in total.

Question 2

An entity is preparing a bid for a special project requiring the production of 35,000 units. The engineering personnel have advised that the units can be produced in groups with the first group consisting of 1,000 units. A review of prior experience indicates that the direct labor time needed per unit will be progressively smaller by a constant percentage rate as experience is gained in the production process. The quantitative method that would best estimate the entity’s total cost for the project is

A. Dynamic programming.
B. Time series analysis.
C. Linear programming.
D. Learning curve analysis.

Answer 2

D. Learning curve analysis.

Learning curves reflect the increased rate at which people perform tasks as they gain experience. Thus, the time required to perform a given task becomes progressively shorter. Ordinarily, the learning curve is expressed as a percentage of reduced time to complete a task for each doubling of cumulative production.