CMA Final · Strategic Cost Management · Learning Curve
A Chennai firm expects a 90% cumulative average learning curve. The first unit of a product needs 100 labour hours at ₹100 per hour. What is the expected average labour cost per unit when 16 units have been produced?
The average labour cost per unit is ₹6,561. Sixteen units involve four doublings, so the average time is 100 hours multiplied by 0.9 four times, or 65.61 hours. At ₹100 per hour, the average cost works out to ₹6,561.
- A₹6,561Correct
- B₹8,100
- C₹9,000
- D₹10,000
Explanation
16 units is 4 doublings from 1 unit. The cumulative average time = 100 × 0.9^4 = 100 × 0.6561 = 65.61 hours. At ₹100 per hour, the average cost = ₹6,561. ₹8,100 applies only 2 doublings (0.81). ₹9,000 applies a single 10% reduction. ₹10,000 ignores learning.
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