LEARNING CURVE ANALYSIS

Learning curve theory shows that productivity rate marginally

increases as employees gain experience in his work based on
one of the application of Pareto’s law.

It is a function that measures how labor-hours per unit decline

as units of production increases, because workers are learning
and becoming better at their jobs.
Normally, efficiency increases by an average of 20% for every
doubling of output.
 TWO LEARNING CURVE MODELS
Crawford Model
Wright Model
Incremental time
Cumulative average time
needed to produce the
per unit declines by a
last unit declines by a
constant percentage
constant percentage
each time the
each time the
cumulative quantity of
cumulative quantity of
units produced doubles
units produced doubles
SAMPLE PROBLEM

A worker initially needs 20 hours to produce the first unit.

The average direct labor cost is P30. Analyze the effects of
the learning curve theory up to the fifth doubling of
activities to the unit costs of production using the:

1. Cumulative average time model

2. Incremental unit time model
Cumulative average time model
a b c D e f
(a x b) (c x d) (e/a)

Moving average labor hours per Estimated total

Units hrs. to produce DL Rate per hr. Total DL cost Ave. DL Cost/unit
units the units

1 20.00 20.00 P 30.00 P 600.00 P 600.00

2 (20 x 80%) 16.00 32.00 30.00 960.00 480.00

4 (16 x 80%) 12.80 51.20 30.00 1,536.00 384.00

8 (12.80 x 80%) 10.24 81.92 30.00 2,457.60 307.20

16 (10.24 x 80%) 8.192 131.072 30.00 3,932.16 245.76

32 (8.192 x 80%) 6.5536 209.7152 30.00 6,291.456 196.608

Incremental unit-time model
a b c D e f
(a x b) (c x d) (e/a)
Estimated total
Units Incremental labor hours hrs. to produce DL Rate per hr. Total DL cost Ave. DL Cost/unit
the units

1 20.00 20.00 P 30.00 P 600.00 P 600.00

2 (20 x 80%) 16.00 36.00 30.00 1080.00 540.00

4 (36 x 80%) 28.80 64.80 30.00 1,944.00 486.00

8 (64.80 x 80%) 51.84 116.64 30.00 3,499.20 437.40

16 (116.64 x 80%) 93.312 209.952 30.00 6,298.56 393.66

32 (209.952 x 80%) 167.962 377.914 30.00 11,337.30 354.29