Learning curve theory, its adaptability in determination of labour related cost in manufacturing environment

Knowledge/Application of learning Curve is useful both in planning and control. Standard cost for new operations should be reviewed and revised frequently to reflect the anticipated learning pattern. It helps to analyze/establish cost – volume – profit (CVP) relationship during the familiarization phase of product or process. It is very useful for cost estimates and immense value as a tool for forecasting. Cost predictions relating to direct labour virtually allow for the effect of learning process, which entails a mathematical/statistical techniques. It is geometrical progression which reveals that there is steadily decreasing cost for the accomplishment of a given repetitive operation, as the identical operation is increasingly repeated. Learning effect exists during the workers familiarization period on the job. After this experimental period is over, productivity tends to be stable and no further improvement is possible. Learning curve theory is essentially a measure of this experience gained in production of a commodity by the organization. People involved in the process become more efficient as each subsequent unit produced takes fewer man hours. A company must not blindly adopt another company's learning curve. The prudent approach for a company is to develop knowledge of its own learning preference.