GMS 401 Chapter Notes - Chapter 6: Wilfrid Laurier University, Shared Experience
24 Dec 2017
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In other words, it takes less time to complete each additional unit a firm produces: however, time savings in completing each subsequent unit decreases. There are the major attributes to the learning curve: learning curves were first applied to industry in a report by t. p. Wright describes how direct-labour costs of making a particular airplane decreases with learning, a theory since confirmed by other aircraft manufacturers. That is, when production doubles, the decrease in time per unit affects the rate of the learning curve. If the first unit of a particular product took 10 labour hours, and if a 70% learning curve is present. The hours the fourth unit will take require doubling twice from 1 to 2 to 4. Therefore, the formula is: hours required for unit 4 = 10 x (0. 70)2 = 4. 9 hours. The lower the number say, (70% compared to 90%), the steeper the slope and the faster the drop-in cost.
