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Target cos and learning rate.

Forums › ACCA Forums › ACCA PM Performance Management Forums › Target cos and learning rate.

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • June 3, 2018 at 8:31 pm #455849
    umairr
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    I just wanted to ask if we set up a target cost with a learning rate lets say 90% and the actual learning rate is 95% so the target cost will remain the same but the cost gap will decrease right?

    Because in an exam kit I’ve done they said as the learning rate changed the cost gap will increase.

    June 4, 2018 at 5:36 am #455891
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51571
    • ☆☆☆☆☆

    The higher the learning rate, then the less the effect of learning (if, for example, the learning rate is 100% then they are not learning at all and the time per unit will not reduce).

    So if the actual learning rate is higher than the budgeted learning rate, the labour cost will be higher and therefore the cost gap will increase.

    I do make this point in my free lectures on the learning rate.

    The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.

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