Learning Curves
A learning curve is a graphical representation of the changing rate of learning (in the average person) for a given activity or tool. Typically, the increase in retention of information is sharpest after the initial attempts, and then gradually evens out, meaning that less and less new information is retained after each repetition.
The learning curve can also represent at a glance the initial difficulty of learning something and, to an extent, how much there is to learn after initial familiarity
The basic assumption underlying the learning curve is that people either individually, or as members of a production team, gain proficiency with repetition of the task or project. People are able to see how much progress they have made with time and therefore are motivated to toward better performance.
A learning curve describes the nonlinear relationship between labor hours per unit and units of output, we assume a single driver units of output for our purposes though more complex formulas exist
One practical application of learning curves is in forecasting budgets if companies can accurately estimate the rate of learning they can also estimate product cost. Understanding cost is also paramount to pricing decisions, should the company follow a prestige pricing or price skimming strategy.
Determining human resource needs is another application in which learning curves can be used, as companies become more efficient they may eliminate jobs or choose to move them to other functional areas
For companies who budget for high-technology projects, knowing the labor costs associated with that project is critical. Labor time and cost tend to be very high because such projects are highly technical and are being performed by very highly paid specialists
The learning curve can also represent at a glance the initial difficulty of learning something and, to an extent, how much there is to learn after initial familiarity
The basic assumption underlying the learning curve is that people either individually, or as members of a production team, gain proficiency with repetition of the task or project. People are able to see how much progress they have made with time and therefore are motivated to toward better performance.
A learning curve describes the nonlinear relationship between labor hours per unit and units of output, we assume a single driver units of output for our purposes though more complex formulas exist
One practical application of learning curves is in forecasting budgets if companies can accurately estimate the rate of learning they can also estimate product cost. Understanding cost is also paramount to pricing decisions, should the company follow a prestige pricing or price skimming strategy.
Determining human resource needs is another application in which learning curves can be used, as companies become more efficient they may eliminate jobs or choose to move them to other functional areas
For companies who budget for high-technology projects, knowing the labor costs associated with that project is critical. Labor time and cost tend to be very high because such projects are highly technical and are being performed by very highly paid specialists
