Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Learning Rate (September 16 Question 29)
- This topic has 3 replies, 2 voices, and was last updated 7 years ago by John Moffat.
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- December 4, 2016 at 4:08 pm #353746
29:
The direct labour cost per unit has been based on an expected learning rate of 90% but now the finance director has realised that a 95% learning rate should be applied.
Which of the following statements is true?A The target cost will decrease and the cost gap will increase
B The target cost will increase and the cost gap will decrease
C The target cost will remain the same and the cost gap will increase
D The target cost will remain the same and the cost gap will decrease
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I understand the concept behind why the target cost will remain the same but I need you to explain to me why will the cost gap increase? (The answer is C)December 4, 2016 at 4:34 pm #353762The higher the learning rate, the slower the learning is (if the learning rate was 100% then it would mean they were not ever getting any faster).
So with a higher learning rate, the time per unit will be higher and therefore the cost per unit will be higher. This will mean a higher cost gap.
December 4, 2016 at 7:33 pm #353817Oh okay I get it, it actually means vice versa. Got it, thanks John!
December 5, 2016 at 7:17 am #353917You are welcome 🙂
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