# CMA Study Group

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## Q & A - SECTION B - Budgeting

• #### 1.  Q & A - SECTION B - Budgeting

Posted 05-15-2023 02:34 AM

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 05-15-2023 06:16 AM

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

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Kishore Kumar N
Bengaluru
Karnataka
India
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• #### 3.  RE: Q & A - SECTION B - Budgeting

Posted 05-15-2023 07:47 AM
Hi,

Kishore thank you for the quick reply.

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 05-15-2023 01:06 PM

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 rateof 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%

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

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

Posted 06-06-2023 04:36 AM
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