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  • 1.  Q & A - SECTION B - Budgeting

    Posted 25 days ago
    Thank you Mr.  Deepak, Kishore, Bilal for your previous answers. 

    Q.

    A manufacturing company has the opportunity to submit a bid for 20 units of a product on which it
    has already produced two 10-unit lots. The production manager believes that the learning
    experience observed on the first two lots will continue for at least the next two lots. The direct labor
    required on the first two lots was as follows.
    • 5,000 direct labor hours for the first lot of 10 units
    • 3,000 additional direct labor hours for the second lot of 10 units
    The learning rate experienced by the company on the first two lots of this product is

    a. 40.0%.
    b. 60.0%.
    c. 62.5%.
    d. 80.0%.

    I did not understand how they solved the problem.


    WITH REGARDS,


    SARUN PORATHUR SIMON




  • 2.  RE: Q & A - SECTION B - Budgeting

    Posted 24 days ago

    Hi,
    The correct answer is letter d > 80%

    slno: Particulars Working-1 Working-1 Result Comment
    1 Average Hours for 10  units (5000+3000)/20 400 Hours  
    2 Average hours for  10 units 5000/10 500 Hours  
    3 Learning rate is 400/500 80.0% Answer  is d


    ------------------------------
    Kishore Kumar N
    Bengaluru
    Karnataka
    India
    ------------------------------



  • 3.  RE: Q & A - SECTION B - Budgeting

    Posted 24 days ago
    Hi,

    Kishore thank you for the quick reply.

    Sorry to ask. 

    I didn't get the logic behind the calculations..

    My calculation goes like this:

    • 5,000 direct labor hours for the first lot of 10 units
    • 3,000 additional direct labor hours for the second lot of 10 units

    Learning Curve = 3000/5000*100
                              = 60%
    The answer is wrong. But I can't get the logic behind this.



    WITH REGARDS,


    SARUN PORATHUR SIMON







  • 4.  RE: Q & A - SECTION B - Budgeting

    Posted 24 days ago

    Hi,
    Please note when employees become more familiar with the operation task the per unit labor hours will fall as experience is gained and production is more efficient ( Learning curve).

    Note: As cumulative production double ie.  From 1 to 2units and 2 to 4units and 4 to 8 units  so on,
    The cumulative average time per unit falls to a certain fixed % called learining curve rate
    of the earlier average time
       
    so,    
    This starts with the first unit 5000/10 500
    The second lot for 10 units (5000+3000)/20 400
    therefore, the Learning rate is    80.0%


    ------------------------------
    Kishore Kumar N
    Bengaluru
    Karnataka
    India
    ------------------------------



  • 5.  RE: Q & A - SECTION B - Budgeting

    Posted 3 days ago
    Hi

    The learning curve sets into the human activity when it involves a unique job as the number of units double the previous batch size.

    Eg.. If the first batch is for 10 units, the cumulative production after the second batch would be 20 units. Isn't it?. Cumulative time taken at the end of the first and second batches are 5000 hours and 8000 hours. Right? 5000+3000

    Now see how the learning curve is setting here. Since the second batch is expected to double under normal circumstances but when LCR sets in, it works this way 5000 x 2 x LCR = 8000 hours

    What is that LCR? = 8000/5000 x 2 which is nothing but 80%

    CA L.Muralidharan
    6383228202
    Chennai