CMA Final · Strategic Cost Management · Learning Curve
Kaveri Engineering observes that the first unit of a machine took 200 hours, and the first 4 units together took 648 hours. Assuming the cumulative average time model, what is the learning rate?
The learning rate is 90%. The 4-unit cumulative average is 648/4 = 162 hours, which is 81% of the first unit's 200 hours. Because 4 units mean two doublings of output, r squared equals 0.81, so r is 0.90.
- A90%Correct
- B81%
- C80%
- D95%
Explanation
The cumulative average for 4 units is 648 / 4 = 162 hours. The ratio to the first unit is 162 / 200 = 0.81. Since 4 units involve two doublings, r² = 0.81, so r = 0.90 or 90%. 81% is wrong because it treats the ratio as a single doubling.
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