[angelaht]

Hi John, I got it. But my confusion here is why we shouldn’t revise the standard cost to 0.5 hours after the batch 16th, rather than from the first batch.

Because the standard cost was revised to this figure, but only once the “steady state” was reached. Does that not mean that any batches after the batch 16th will be revised to 0.5 hours, not the first 16th?

So, my understanding will be the total hours for 10,000 batches is:
(the total of first 16 batches) + (9984 * 0.5)

Many thanks,
Angela

[angelaht]

Dear John,

I also have another question in relation to Learning Curve.

The question did not mention the learning rate. However, the learning effect stopped after the 16th batch.
1st batch took 0.75 hours
16th batch took 0.5 hours
The standard cost was revised to this figure once the “steady state” was reached.
Produced 10,000 batches.
Asked to calculate Fav labour efficiency planning variance.

The solution does not take learning effect into account when calculating variance.
(10000*0.75)-(10000*0.5)= 2500 Fav

Why dont we take learning effect into account when calculating Revised Hours?
For my understanding, standard cost is only revised after the steady state. Hence from batch 16th backward, we have to calculate the total hours based on learning rate.

But learning rate isnt given, I am unable to do that.

Can you please show me where i got it wrong?

Thanks,
Angela

[angelaht]

That’s perfect. I got it now. Thank you John

[angelaht]

Hi Sir, I just have a quick question about the solution for question 5 in June 2012. In the solution for question 5-c, it mentioned that the cost of capital is lower than the target return on investment. Where can I get the figure for Target Return on Investment?
Also, in the question like this about RI – asking if they perform well, what should I compare to?
Many thanks,
Angela

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