CMA Final · Strategic Cost Management · Learning Curve
Aarav Components Ltd. expects an 80% learning curve on the cumulative average time model. The first unit of a new pump takes 100 labour hours. What is the total labour time for the first 4 units?
The total is 256 hours. On a cumulative average model, doubling output from 1 to 2 to 4 units reduces the average time to 80 then 64 hours per unit. Multiplying the 4-unit average of 64 hours by 4 units gives 256 hours in total.
- A256 hoursCorrect
- B295.2 hours
- C320 hours
- D204.8 hours
Explanation
Under the cumulative average model, the average time falls to 80% each time cumulative output doubles. For 2 units the average is 80 hours and for 4 units it is 64 hours. Total time is 4 × 64 = 256 hours. The 295.2 figure (100+80+64+51.2) wrongly treats the curve as the time of individual units.
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