CMA Final · Strategic Cost Management · Learning Curve
Meenakshi Fabricators makes a special press. The first unit takes 1,000 labour hours, the learning rate is 90% (cumulative average time model), and labour costs ₹50 per hour. What is the labour cost of the 3rd and 4th units together?
The labour cost is ₹72,000. Total time for 2 units is 1,800 hours and for 4 units is 3,240 hours, so units 3 and 4 take 1,440 hours. At ₹50 per hour this gives ₹72,000.
- A₹72,000Correct
- B₹81,000
- C₹90,000
- D₹1,62,000
Explanation
For 2 units the average is 900 hours, so the total is 1,800 hours. For 4 units the average is 810 hours, so the total is 3,240 hours. Units 3 and 4 take 3,240 − 1,800 = 1,440 hours, which costs 1,440 × 50 = ₹72,000. ₹81,000 wrongly uses the 4-unit average for just 2 units.
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