Exam 16: Learning Curve Analysis

How are learning curves useful in financial planning?

Which one of the following statements is NOT a typical assumption related to developing learning curves?

Which one of the following is an assumption of learning curves?

Which one of the following statements about learning curves is TRUE?

The first learning curve was developed by the aircraft industry.

Conversion Factors for the Cumulative Average Number of Direct Labor Hours per Unit 80\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.53718 37 0.43976 2 0.90000 20 0.52425 38 0.43634 3 0.83403 21 0.51715 39 0.43304 4 0.78553 22 0.51045 40 0.42984 5 0.74755 23 0.50410 64 0.37382 6 0.71657 24 0.49808 128 0.30269 7 0.69056 25 0.49234 256 0.24405 8 0.66824 26 0.48688 512 0.19622 9 0.64876 27 0.48167 600 0.18661 10 0.63154 28 0.47668 700 0.17771 11 0.61613 29 0.47191 800 0.17034 12 0.60224 30 0.46733 900 0.16408 13 0.58960 31 0.46293 1,000 0.15867 14 0.57802 32 0.45871 1,200 0.14972 15 0.56737 33 0.46464 1,400 0.14254 16 0.55751 34 0.45072 1,600 0.13660 17 0.54834 35 0.44694 1,800 0.13155 18 0.53979 36 0.44329 2,000 0.12720 90\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.73545 37 0.67091 2 0.95000 20 0.73039 38 0.66839 3 0.91540 21 0.72559 39 0.66595 4 0.88905 22 0.72102 40 0.66357 5 0.86784 23 0.71666 64 0.62043 6 0.85013 24 0.71251 128 0.56069 7 0.83496 25 0.70853 256 0.50586 8 0.82172 26 0.70472 512 0.45594 9 0.80998 27 0.70106 600 0.44519 10 0.79945 28 0.69754 700 0.43496 11 0.78991 29 0.69416 800 0.42629 12 0.78120 30 0.69090 900 0.41878 13 0.77320 31 0.68775 1,000 0.41217 14 0.76580 32 0.67471 1,200 0.40097 15 0.75891 33 0.68177 1,400 0.39173 16 0.75249 34 0.67893 1,600 0.38390 17 0.74646 35 0.67617 1,800 0.37711 18 0.74080 36 0.67350 2,000 0.37114 -How long will it take to make units 11 through 20 if the first one took 8 hours and there is a 90 percent learning rate? Refer to the copy of Table G.1 above.

Conversion Factors for the Cumulative Average Number of Direct Labor Hours per Unit 80\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.53718 37 0.43976 2 0.90000 20 0.52425 38 0.43634 3 0.83403 21 0.51715 39 0.43304 4 0.78553 22 0.51045 40 0.42984 5 0.74755 23 0.50410 64 0.37382 6 0.71657 24 0.49808 128 0.30269 7 0.69056 25 0.49234 256 0.24405 8 0.66824 26 0.48688 512 0.19622 9 0.64876 27 0.48167 600 0.18661 10 0.63154 28 0.47668 700 0.17771 11 0.61613 29 0.47191 800 0.17034 12 0.60224 30 0.46733 900 0.16408 13 0.58960 31 0.46293 1,000 0.15867 14 0.57802 32 0.45871 1,200 0.14972 15 0.56737 33 0.46464 1,400 0.14254 16 0.55751 34 0.45072 1,600 0.13660 17 0.54834 35 0.44694 1,800 0.13155 18 0.53979 36 0.44329 2,000 0.12720 90\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.73545 37 0.67091 2 0.95000 20 0.73039 38 0.66839 3 0.91540 21 0.72559 39 0.66595 4 0.88905 22 0.72102 40 0.66357 5 0.86784 23 0.71666 64 0.62043 6 0.85013 24 0.71251 128 0.56069 7 0.83496 25 0.70853 256 0.50586 8 0.82172 26 0.70472 512 0.45594 9 0.80998 27 0.70106 600 0.44519 10 0.79945 28 0.69754 700 0.43496 11 0.78991 29 0.69416 800 0.42629 12 0.78120 30 0.69090 900 0.41878 13 0.77320 31 0.68775 1,000 0.41217 14 0.76580 32 0.67471 1,200 0.40097 15 0.75891 33 0.68177 1,400 0.39173 16 0.75249 34 0.67893 1,600 0.38390 17 0.74646 35 0.67617 1,800 0.37711 18 0.74080 36 0.67350 2,000 0.37114 -A contractor is preparing a bid to install swimming pools at a new housing addition.The estimated time to build the first pool is 35 hours.The contractor estimates a 90 percent learning rate; what is the estimated time to install all 30 pools? Refer to the copy of Table G.1 above.

As the cumulative number of units produced becomes large

The ________ can be represented by a line called a learning curve.

Learning curves provide their greatest advantage in the early stages of new service or product production.

The annual report for Luddite Corporation boasted of their ERP implementation and noted that,"while there were initially some growing pains,our learning rate for this system has been calculated at 100%." What are the implications of this statement?

Conversion Factors for the Cumulative Average Number of Direct Labor Hours per Unit 80\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.53718 37 0.43976 2 0.90000 20 0.52425 38 0.43634 3 0.83403 21 0.51715 39 0.43304 4 0.78553 22 0.51045 40 0.42984 5 0.74755 23 0.50410 64 0.37382 6 0.71657 24 0.49808 128 0.30269 7 0.69056 25 0.49234 256 0.24405 8 0.66824 26 0.48688 512 0.19622 9 0.64876 27 0.48167 600 0.18661 10 0.63154 28 0.47668 700 0.17771 11 0.61613 29 0.47191 800 0.17034 12 0.60224 30 0.46733 900 0.16408 13 0.58960 31 0.46293 1,000 0.15867 14 0.57802 32 0.45871 1,200 0.14972 15 0.56737 33 0.46464 1,400 0.14254 16 0.55751 34 0.45072 1,600 0.13660 17 0.54834 35 0.44694 1,800 0.13155 18 0.53979 36 0.44329 2,000 0.12720 90\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.73545 37 0.67091 2 0.95000 20 0.73039 38 0.66839 3 0.91540 21 0.72559 39 0.66595 4 0.88905 22 0.72102 40 0.66357 5 0.86784 23 0.71666 64 0.62043 6 0.85013 24 0.71251 128 0.56069 7 0.83496 25 0.70853 256 0.50586 8 0.82172 26 0.70472 512 0.45594 9 0.80998 27 0.70106 600 0.44519 10 0.79945 28 0.69754 700 0.43496 11 0.78991 29 0.69416 800 0.42629 12 0.78120 30 0.69090 900 0.41878 13 0.77320 31 0.68775 1,000 0.41217 14 0.76580 32 0.67471 1,200 0.40097 15 0.75891 33 0.68177 1,400 0.39173 16 0.75249 34 0.67893 1,600 0.38390 17 0.74646 35 0.67617 1,800 0.37711 18 0.74080 36 0.67350 2,000 0.37114 -The fifth unit of a long production run was produced in 15 hours.The process has an estimated learning rate of 90 percent.What is the lowest level of output at which the average production time per unit falls below 15 hours? Refer to the copy of Table G.1 above.

A company is introducing a new product.The first unit took 1,000 hours to complete,and the fourth unit took 750 hours to complete.What is the rate of learning for this product?

The learning effect can be represented by a line called a learning curve.

An industrial engineer observes a brand new process and develops time standards for several of the manual components of the production line.What are the implications of learning effects on the time standards and the line balance? What could be done to address this situation?

Conversion Factors for the Cumulative Average Number of Direct Labor Hours per Unit 80\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.53718 37 0.43976 2 0.90000 20 0.52425 38 0.43634 3 0.83403 21 0.51715 39 0.43304 4 0.78553 22 0.51045 40 0.42984 5 0.74755 23 0.50410 64 0.37382 6 0.71657 24 0.49808 128 0.30269 7 0.69056 25 0.49234 256 0.24405 8 0.66824 26 0.48688 512 0.19622 9 0.64876 27 0.48167 600 0.18661 10 0.63154 28 0.47668 700 0.17771 11 0.61613 29 0.47191 800 0.17034 12 0.60224 30 0.46733 900 0.16408 13 0.58960 31 0.46293 1,000 0.15867 14 0.57802 32 0.45871 1,200 0.14972 15 0.56737 33 0.46464 1,400 0.14254 16 0.55751 34 0.45072 1,600 0.13660 17 0.54834 35 0.44694 1,800 0.13155 18 0.53979 36 0.44329 2,000 0.12720 90\% Learning Rate ( n= cumulative production) n n n 1 1.00000 19 0.73545 37 0.67091 2 0.95000 20 0.73039 38 0.66839 3 0.91540 21 0.72559 39 0.66595 4 0.88905 22 0.72102 40 0.66357 5 0.86784 23 0.71666 64 0.62043 6 0.85013 24 0.71251 128 0.56069 7 0.83496 25 0.70853 256 0.50586 8 0.82172 26 0.70472 512 0.45594 9 0.80998 27 0.70106 600 0.44519 10 0.79945 28 0.69754 700 0.43496 11 0.78991 29 0.69416 800 0.42629 12 0.78120 30 0.69090 900 0.41878 13 0.77320 31 0.68775 1,000 0.41217 14 0.76580 32 0.67471 1,200 0.40097 15 0.75891 33 0.68177 1,400 0.39173 16 0.75249 34 0.67893 1,600 0.38390 17 0.74646 35 0.67617 1,800 0.37711 18 0.74080 36 0.67350 2,000 0.37114 -Given that the fifth unit took 10 hours to build and the learning rate is 90 percent,how much time will it take to build units 11 through 15? Refer to the copy of Table G.1 above.

The first unit took 12 hours to produce and the learning rate is expected to be 85 percent.How long will it take to produce the tenth unit?

Which statement regarding learning rates is best?

Which one of the following statements about learning curves is FALSE?

A manager of a company producing computer chips knows that in the early stages of production for a new product,the expenditures exceed receipts,whereas in the latter stages,the reverse is true.Give an explanation for this phenomenon.