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ACCA Applied Knowledge · Management Accounting · Analytical techniques in budgeting and forecasting

The first unit of a product takes 250 labour hours and an 80% learning curve applies. What is the total time expected for the first 4 units?

The first four units take 640 hours in total. Doubling output twice gives a cumulative average time of 250 x 80% x 80%, which is 160 hours per unit. Multiplying by four units gives 640 hours. Quoting 160 hours would give only the average.

  1. A160 hours
  2. B800 hours
  3. C1,000 hours
  4. D640 hoursCorrect

Explanation

Output doubles twice from 1 to 4 units, so the cumulative average time is 250 x 0.8 x 0.8 = 160 hours per unit. Total time is 160 x 4 = 640 hours. 160 hours is only the average per unit, and 1,000 hours ignores learning entirely.

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