CMA Final · Strategic Cost Management · Learning Curve
A firm records that the first unit of a job took 100 hours and the first 4 units together took 324 hours. Assuming a cumulative average learning curve applies, what is the learning rate?
The learning rate is 90%. The average time for four units is 81 hours against 100 for the first unit. Because output doubled twice, the rate squared equals 0.81, so the rate is the square root of 0.81, which is 0.90.
- A90%Correct
- B81%
- C85%
- D95%
Explanation
The average for 4 units is 324/4 = 81 hours. Output has doubled twice (1 to 2 to 4), so 100 × r² = 81, giving r² = 0.81 and r = 0.90. The 81% option forgets that two doublings occurred and takes the ratio itself as the rate.
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