E
B U S I N E S S A N A L Y T I C S M O D U L E
Learning Curves
DISCUSSION QUESTIONS
1. Limitations of the use of learning curves include:
◼ Any change in the process, product, or personnel, disrupts
the curve
2. Some applications of the learning curve are: Internal man-
and pricing.
4. We cannot determine the implications for Great Lakes, Inc., if
the engine in the tug boats is changed. Any change in product or
5. Learning curves are not as applicable to assembly lines for
the short run as in other activities because the whole line is paced
6. The learning curve can be disrupted by any change in process,
7. The doubling effect in learning curves means that each time
output is doubled (say from 4 to 8 units), the time required to
produce the doubled unit is x% of the time to produce the base
LO E.2: Use the doubling concept to estimate times
AACSB: Analytical thinking
8. Pursue a steeper learning curve by:
◼ Following an aggressive pricing policy
◼ Focusing on continuing cost reduction and productivity
improvement
ACTIVE MODEL EXERCISE (AVAILABLE IN MYOMLAB)
1. If the learning is not as good as expected and rises to 90%,
2, the 3rd falls below $4 Mil.
4. How many boats need to be produced before the average cost
END–OF-MODULE PROBLEMS (PROBLEMS WITH
ASTERISKS APPEAR IN MYOMLAB ONLY)
(c) 8th takes (32.5)(0.85) = 27.6 min
(c) 8th day = (456)(0.90) = 410 min
(d) 16th day = (410)(0.90) = 369 min
(b) For the first 10 units, at an 80% learning factor, the
learning-curve coefficient (from Table E.3) is 6.315
15 6.315 = 94.725 minutes
BUSINESS ANALYTICS MODULE E LEA RN I N G CU R VE S 341
E.4 Cumulative times using Table E.3:
(d) First 16 = (12.040)(563) = 6,779
E.5 T1 = 30 hr 80% learning curve
E.12 (a) For Susan: 4th unit required 5 hours; 8th unit required
342 BUSINESS ANALYTICS MODULE E LEA RNI N G CU RV E S
Cost:
(b) Expected price at a volume of 89.6 1012 bits
◼ Using the general learning curve formula: Cost of
Therefore, cost per bit for a volume of 89.6
10
is given by:
Cost = 100 0.77 = 100 0.0823543 = 8.235 milli-cents/bit
E.18 Time to produce eighth plane = 28,718 hours
2.5 3.644 hours for 1st
0.686 =
been better for the previous crew.
(b) At the improved learning rate, five boats require 6,000
4.031 = 24,186, now within the stated labor limits.
Report 6 45 0.849
==
BUSINESS ANALYTICS MODULE E LEA RN I N G CU R VE S 343
E.25 T1 = $448 million
E.32* Step 1: Calculate the log10 of the quantities and the times
344 BUSINESS ANALYTICS MODULE E LEA RNI N G CU RV E S
product or process was changed, the company should
have abandoned the existing learning curve.) It is not at
CASE STUDY
CMI Publishing Company, Inc., Boston. There is some additional
background provided in that book. The case shows actual use of
form in accordance with the contract. The disadvantage is that
IBM may be paying slightly more than they might have been able
make as much money on this contract, and that IBM knows its
business and its costs. If SMT has indeed underestimated its costs
2. Refer to Table E.1. SMT is to produce a new machine to be
used in the manufacture of logic chips. This machine is a highly
how a supplier and purchaser can deal honestly with each other to
develop a long-term relationship.
the specification, process, or personnel. Changes in any of these
are likely to adversely affect the curve and have negative conse-
Learning curves for estimating, as may be true in this case,
are often time-based because dollars add another variable. As
LO E.4: Describe the strategic implications of learning curves
AACSB: Application of knowledge