- This topic has 3 replies, 2 voices, and was last updated 7 months ago by John Moffat.
- May 6, 2020 at 4:04 am #570105Noah098
“A standard costing system would need to set standard labour times after the learning curve has reached a steady state.”
Why do we have to wait till the ‘steady state’ has been achieved? Could you elaborate on this a bit sir?
Thank you.May 6, 2020 at 5:07 am #570109Noah098
There is a serious deficiency in adopting this approach(about allocating costs and resources till the learning curve stops/reaches steady state) because essentially we are assuming that the demand will reach that point. What if the demand does not go as far as the steady rate?Our entire set of calculations will go for a tossMay 6, 2020 at 5:08 am #570110Noah098
Your response would be much helpful sir.May 6, 2020 at 8:05 am #570121John MoffatKeymaster
In future you must ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other.
Learning does not go on for ever – there will always come a time when workers are working as fast as they ever will (and will then not get any faster).
If therefore we are estimating the cost per unit for long-term mass production (of more than the level at which learning stops) then we need to calculate what the time (and cost) will be once learning has stopped.
There is no deficiency in this because we estimate the time (and costs) for the level of production we estimate. If the level is below the steady state then we use the actual estimated time for this units. If the level is above the steady state then (and only then) we use the time (and cost) once the steady state has been achieved.
Have you watched my free lectures, because I do explain this in the lectures?
(With regard to your third post, I always answer questions within 24 hours (and usually much faster) but I do not sit permanently in front of the computer 🙂 )
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