You have been examined on learning curves previously. Although they are a little less likely in this examination, they are still relevant and this chapter is included as revision – there is nothing new to learn.
In most budgeting techniques we assume that the total variable cost is reasonably linear – that the variable cost per unit is fixed.
In the case of labour, this is very often not the case in the early stages of a new product. If we were intending to start production of a new product, then the obvious thing to do would be to produce a prototype in order to assess how long it would take to produce each unit. However, this would be dangerous because as we were to produce more and more units it is likely that the time taken for each unit would reduce as the workers gained experience. This reduction in time per unit is known as the learning effect.