What do you estimate the buyer should pay per unit for the next 700 pieces assuming the supplier demonstrates a 75% learning curve? What if the learning rate is actually 85%? What do you estimate is the per unit cost of the next 700 pieces?
1.A:$178/unit at a 75% Learning Curve
212/unit at an 85% Learning Curve
2. Under what conditions can we use learning curves to estimate prices? In other words, when does the learning curve apply?
2. A:The Learning Curve is applicable when used for new products or processes that have a high potential for improvement, such as producing a technically complex item for the first time, or when an item has high direct-labor content.
3.Why can we use rough estimates when applying learning curves?
3. A:Assuming a reduction in time will follow a predictable pattern, and because it is predictable, we can develop estimates.
4.Why do manual processes experience greater learning curves than automated processes?
4. A:The worker has the ability to learn and improve through repetitive effort and increased efficiency.
5.Are there factors besides learning that can help reduce costs as volume increases?
5. A:Modifications to the production process; such as introducing new production methods, substituting increased automation for labor, or updating process technology.