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This is a question Chair Co where we are asked the actual rate of the learning curve.
Please tell me how to do the arithmetic, here is the question below:
Chair Co has in development several new products. One of them is a new type of luxury car seat. The estimated labour time for the first unit is 12 hours but a learning curve of 75% is expected to apply for the first eight units produced. The cost of labour is $15 per hour.
The cost of materials and other variable overheads is expected to total $230 per unit. Chair Co plans on pricing the seat by adding a 50% mark-up to the total variable cost per seat, with the labour cost being based on the incremental time taken to produce the 8th unit.
The first phase of production has now been completed for the new car seat. The first unit actually took 12·5 hours to make and the total time for the first eight units was 34·3 hours, at which point the learning effect came to an end.
Chair Co are planning on adjusting the price to reflect the actual time it took to complete the 8th unit.
The actual time for the first unit was 12.5 hours.
The average time per unit when they make 8 units is 34.3/8 = 4.2875 hours.Given that 8 involves doubling 3 times, the learning rate is the third root of 4.2875/12.5 = 0.70 or 70%.
I do explain the logic of this in my free lectures on learning curves.
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