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ACCA PM · Guided practice (Show me how)

Chapter 12: Analytical techniques in budgeting and forecasting

Learning curves - by doubling, by formula, and when learning stops

Part 1. The time taken to produce the first unit is 100 hours. There is a learning rate of 75%. How long will it take to produce an additional 7 units?

Part 2. Flogel Ltd has just produced the first full batch of a new product taking 200 hours. Flogel has a learning curve effect of 85%.

(a) How long will it take to produce the next 15 batches?

(b) Flogel expects that after the 30th batch has been produced, the learning effect will cease. From the 31st batch onwards, each batch will take the same time as the 30th batch. What time per batch should be budgeted?

Formula (PM formulae sheet): Y = ax^b, where Y = cumulative average time per unit (or batch), a = time taken for the first unit (or batch), x = cumulative number of units (or batches), b = log LR / log 2, LR = the learning rate as a decimal.

  1. Part 1: the doubling method

    Prepare the cumulative average time table and calculate the total time and additional time for the specified output.

  2. Part 2 (a): the formula

    Calculate Flogel Ltd's learning index, cumulative average and total time for the specified batches and the additional time after the first batch.

  3. Part 2 (b): when learning stops

    Calculate Flogel Ltd's cumulative average and total times at the end of learning and the preceding batch, and steady-state time per batch.

Opening this exercise…