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Quantitative analysis in budgeting – Learning curves part 1 – ACCA Performance Management (PM)

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  1. Hello Mr John,
    I think there has been a slight error in example 3 on your part. You mistook 90.08 as 90.80 for calculating the total time for 29 units.
    Kindly correct me if I am mistaken.

  2. John, This is brilliant, you are brilliant!! Far better than the BPP text books. Thank you so much. I can’t really donate now because I am currently without funds but I PROMISE, once I qualify I will send you a substantial donation. I’m not sure why you do this but you are helping me change my life! Thank you!! XX

  3. Sir, while resolving part b of example 3, we calculated the avg. time for 29 units then we calculated avg. time for 30 units then subtracted avg. 30 minus avg. 29 to get the avg. time of 30th unit. However, the final answer derived was the avg. time of 30th unit not the exact time of 30th unit. So we we could not consider the avg. time of 30th unit from the earlier formula where we calculated the avg. time for 30 units.

    • That is not the case.

      The formula gives us the average time per unit for any number of units. From that we can calculate the total time taken to make 29 units and the total time taken to make 30 units. The difference between the two must be the time taken to make the 30th unit – it is not an average time at all.

  6. Hey Sir,
    I鈥檝e seen in several answer schemes that used the cost of the first unit for a and even stated in the formula sheet that a=cost of first unit instead of time taken for first unit. Which one should I follow in the exam?

      • It doesn鈥檛 make any sense, we are finding the average time per unit so why would we put the cost inside for a?

      • If you put in the cost for the first unit then the formula gives you the average cost.

        If you put in the time for the first unit then the formula gives you the average time.

        Which you do depends on what the question asks for.

        Multiplying the average time by the cost per hour obviously also gives you the average cost.

        It makes perfect sense!!

  7. Dear John,
    – In example 2, why did we substracted the time taken by first unit to drive the time taken by 7 units? Since the first unit took maximum time because of no learning curve at this stage and the remaining 7 units were having learning curve. I may missed to capture this thing if covered in your lecture. Would appreciate if you can let me understand this.

    • It is covered in the lectures and is very important for the exam.

      The learning curve does not tell the time for any unit directly. It gives the average time per unit for any number of units.

      So we have to calculate the average time per unit if we make 8 units. For this we can calculate the total time to make 8 units. Since we know how long the first of the 8 units took, then the time for the next 7 units is the difference.

  9. Thank you for the lecture , it was so helpful especially during these tough times. However I do have a question . In the example you did you had 69.20 as the time for the 30th batch however when I used my own calculator I got 68.91 , a difference of .29 . Is there an allowance for answers as such during the marking of exams?

  11. Thank you John for this lecture, i have a question with regards to finding log in exams for CBE format exam. Is there a way how can we find log on excel (i believe they have limited excel formulas to an extent)
    Are we also allowed scientific calculators in CBE exam? Please guide

  12. Another question,
    What is the difference between cumulative average hours per unit which equal to 90.08 hrs and average time for 30th 69.20 hrs.
    Could you make it clear plz.

    • The first batch takes 200 hours. Each extra batch takes less and less time and the 30th batch only takes 69.20 hours.

      90.08 hours is the average time per batch for all the batches made, which will therefore be somewhere between 200 and 69.20.

      • Hello!

        My question regarding budgeting of time for a new product (Ex2 in this lecture).

        We know about canceled of learning factor from 30th unit and calculated the number of hours which should be appear in the production plan for total number of unit.
        However, we know that first 29th of unit will take more time.
        Should I present it in my budget?
        For example, I asked calculated the total production time for 1000 of unit in this example.
        My calculation would be 1000*69.20 or (1000-29)*69.2+29*90.8?

        Thanks in advance!

        Best regards,
        Victoria

  13. Hello John sir,
    How are you?
    I hope you are doing well,
    For the example 3 part (b) you got the average time per unit number 30 by getting the cumulative average total time for 30 units and subtract the cumulative average total time for 29 unit which equal to 69.20 hrs.
    My question is I used the doubling method, I calculated the cumulative average total hours for 32 units and also I calculated the time spent for the most recent units I mean for the most recent 16 units (from 17 to 32) which equal 1169.294 and I divided on 16 unit to get the average time spent on unit number 30 but the result comes different I got 73.1 hrs.
    So what is the mistake that I have already done?

    • Each batch they make takes less time. So the 17th will be faster than the 16th, the 18th will be faster than the 17th, and so on.

      We need to know how long the 30th batch will take, which is bound to be less time than the average of the 16th to 30th times.

  15. Hi John,
    As we’d be doing most of the workings on the spreadsheet provided, wouldn’t it be easier to calculate x to the power y on the spreadsheet instead of using a calculator?
    In this example, we’d simply type out “=30^-0.2345” on the spreadsheet and hit enter.
    Thanks.

  16. I just thought it would be useful to point out that when we use the doubling method we can multiply a by our rate to the power required. Using the example given we would get 200×0.85^4 = 104.40.

    • You can always use the formula, but if it does involve doubling then it is easier to use the doubling rule. The question will not tell you which approach to use – that is up to you to check (and it should be obvious always if it involved doubling).

      The exception is when the question asks you to calculate the learning rate. That will always be using the doubling rule – you cannot be asked to use the formula ‘backwards’ 馃檪

      • Dear John!
        Part A, example 3. Doubling Rule gives 1470.42 as the time for the next 15 batches. However, if i use the formula I get 15 X 105.99 = 1589.89. What am I missing / doing wrong here?

      • The formula just gives you the average time per batch. So you still have to calculate the average time per batch for 16 batches, then multiply by 16 to get the total time for 16 batches, and then subtract the time for the first batch (so as to end up with the time for 15 batches).

        (The answer might still end up being slightly different, but that will then be simply due to rounding.)

      • Thank you, I got confused with part B of the example 3 where we use the formula for 30 and 29 batches and the subtract one result to the other. But I guess it has to do with the fact that the learning curve cease at the 30th. Am I right?

      • Yes (although only because we need the time for the 30th batch, because that is the time for all future batches).

        Whether using the doubling rule or using the formula, that only gives us the total time for the total number of batches. For any others (whether it be like part (a) or like part (b)) we need the difference between the two total times.

  18. Hello! I wasn’t 100% sure if I should ask this in the forum or on the lecture notes so I apologise in advance!

    In regards to the learning rate, can we just learn the doubling rule or would we be expected to learn the learning rate formula to calculate additional time for nth unit, which in the BPP text is shown as;

    =(n x t2) – [n-1) x t1]

    cumulative average time for first (n-1) units = t1
    total time for first (n-1) units = (n-1) x t1
    cumulative average time for first n units = t2
    total time for first n units = n x t2

    Hopefully this makes sense!

    Thank you.

    • If you have watched all my lectures on this, then you will know that you need to know how to use both the doubling rule and the formula given on the formula sheet.

      The formula you quote from BPP is not something to learn because if you understand what I explain in the lectures, then it is obvious – it is silly to learn formula for the sake of learning. Most of the exam is testing that you understand what is happening – not that you have learned formulae – which is why only 50% of the exam involves calculations.

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