ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting
A company expects an 80% learning curve to apply to a new product. The first unit takes 100 labour hours. Assuming the cumulative average time model applies, how many hours will the second unit take?
The second unit takes 60 hours. With an 80% curve, the average time for two units is 80 hours, giving a total of 160 hours. Deducting the first unit's 100 hours leaves 60 hours. The figure of 80 hours is only the cumulative average.
- A80 hours
- B60 hoursCorrect
- C64 hours
- D100 hours
Explanation
The cumulative average time for 2 units is 100 x 80% = 80 hours, so the total for 2 units is 160 hours. The second unit therefore takes 160 - 100 = 60 hours. Choosing 80 hours confuses the cumulative average time per unit with the time for the second unit alone.
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