How do you explain what a learning curve theory is?

Answer 1

One of the methods of estimating cost, especially direct labour cost, is through the leaning curve theory.The theory assumes that at the early stage of production staff will use more average labour hours to finish a process and as they gain experience the average time per piece of unit produced or customers served will reduce.Studies have shown that the reduction in the average time taken is on a constant rate as production mounts. A learning curve of 70%, 80% or 90% means that as production mounts or doubles, the average time per unit falls by 30%, 20% or 10% respectively.

ASSUMPTIONS OF LEARNING CURVE

(a) That the task is repetitive.

(b) That only manual labour is involved and there is no automation of processes.

(c) That staff are fully motivated and there are no constraints.

(d) That no labour turnovers occurred for a long time, i.e. that staff do not leave the organisation.

(e) That the products and processes are standardised, no midway modification.

(f) There must be continuous production- no stoppage.

(g) That repetitive process will increase production.

The assumption that repetitive process will lead to increase in production may not hold in all situations as staff may suffer from fatigue and be demotivated from performing well, less time may be spent but less quality work will result.This is because there are many factors which motivate the workman not only knowledge or experience on the job. Again, the assumption of continuous production is too simplistic as other variables such as ill health, labour unrest, machine breakdowns, etc. do disrupt production in practice.