represents cumulative improvement as production doubles
Learning Rate
Establish rate of improvement due to direct-labor cost improvement as production volumes increase
Learning Curves
Learning Curves are used to
Lower Purchase Price Over Time
85% learning rate indicates that direct labor declines by
15% each time production doubles in volume
Learning Curve Components
-Ability of work force to learn and improve through repetitive effort and increased efficiency-Effort by management to pursue productivity gains-Modification to Process (New production methods, substitution of automation for labor, Vertical integration->cost control)
T/F-Not all processes or items benefit from learning curve effects
True
When to use the Learning Curve
-When supplier uses new production process for first time-When supplier produces technically complex item for first time-When item has high direct labor content
