Learning curve is the proficient of a person on doing the work when he gains more experience or familiarity. When people keep doing the same thing over and over, they will improve their skill and spending less time. They will gain more experience when they perform the same work again and again. Learning curve shows the relationship between the time spend on doing the same tasks and the improvement.
In management accounting, we expect that the worker will spend less time producing one unit of a product after they gain more experience with the production process.
Learning Curve Formula
Y = aXb
Y: accumulative average time per unit
a: time spend for the first unit
X: accumulate units of production
b: Index of learning, [b= log (learning curve percentage) ÷ Log 2]
Company A manufactures product X. The worker needs to spend 10 hours per unit during the trial period. Based on past experience, the workers will improve their speed for 90% which means the accumulative time will decrease by 10% every time the output double.
Calculate the average workers’ time spent when the production output increased double.
First, we need to calculate “b”
b = Log (90%) / Log 2
= -0.0457 / 0.3010
= – 0.1518
a = 10 hours
|Cumulative units made (X)||Calculate||Average time spend per unit (Y)||Explain|
|2 units||= 10 (2)-0.1518||9.00||Reduce 10% from 10 hour|
|4 units||= 10 (4)-0.1518||8.10||Reduce 10% from 9 hour|
|8 units||= 10 (8)-0.1518||7.29||Reduce 10% from 8.1 hour|
|16 units||= 10 (16)-0.1518||6.56||Reduce 10% from 7.29 hour|
|100 units||= 10 (100)-0.1518||4.97|
The time will keep reducing 10% every time the output is double. It’s a continual improvement as the worker getting more and more experience. We can calculate by deducting 10% from the current time spend to the next double output. However, this method can help when we want to calculate any specific output level (100 units), as we see in the example.
The Factors Limit the Learning Curve
The workers will keep improving their skills as the more the units produce; however, it does not mean the improvement will go forever. At any specific time (output level) it will stop due to some specific factors such as:
|Factor limit learning curve|
|Machine||The workers may keep improving their skills and spend less time, but the machine will not be able to reduce its working hours. So it will become the bottleneck in the production.|
|Physical limitation||Even the workers try to improve work efficiency and reduce time spent, they are still the human who has the physical limit. The learning curve will slow down as it reaches the limitation, we cannot reduce the spending time to an impossible level.|
|Staff Turnover||The company expects the workers to improve their work; however, some workers will resign. As the new workers come, the cycle of learning curve needs to restart. High staff turnover will harm the learning curve.|
|Team spirit||The team spirit is the internal power that will motivate the staff to complete the tasks and continue improvement. For example, they will not work hard if they have any conflict with their direct managers.|
|Work rotation||The workers will improve themselves when they do the same task over and over. If the company require them to rotate their job so often, it also impacts their learning curve. They need to start over from the beginning when learning new tasks.|