CA D. Singhal (CA ) (490 Points)
13 October 2011
Roshan Thomas
(C.E.O )
(356 Points)
Replied 14 October 2011
The equation that we learn establishes the relation b/n labour hours and output that for twice the qty of output the labour hour reduces at a fixed rate. So we can use the equation only for labour hours.
Direct material may exhibit a different kind of relationship with increasing output. We cannot apply the same equation here
CA Deepak Joshi
(TaxTalk)
(178 Points)
Replied 14 October 2011
Hi devya...
Consider an example where 2 kgs of Raw material is needed per unit of FG. Also 10 Hrs are needed for first unit produced......
Now when we produce second unit, third unit, 4th unit, fifth unit etc.... the labour force becomes akin to the work they are doing... hence there is learning curve....
That is, they consume less time than the time they consumed on the previous unit.
But the ratio of input to output remains constant. How can input experience a learning curve when the ratio is fixed as min.... 2 kg of RM is needed in any condition to produce 1 unity of FG...
@ Roshan... Learning curve also applies even when the the next output is less than twice of the previous one..:)
CA D. Singhal
(CA )
(490 Points)
Replied 14 October 2011
CA Deepak Joshi
(TaxTalk)
(178 Points)
Replied 14 October 2011
CA D. Singhal
(CA )
(490 Points)
Replied 14 October 2011
Thanks for the explanation Deepak, you got my querry right...
Deepti
(Article)
(54 Points)
Replied 14 October 2011
If we apply Learning Curve theory on cost items other than Labour (e.g. Material) then it is known as Experience Curve (Source https://vimeo.com/27288408 & Last question of Learning Curve of Book of Parag Gupta Sir).
CA Deepak Joshi
(TaxTalk)
(178 Points)
Replied 15 October 2011
Hey deepti tnx a lot fr dat info!!!!.......a very important update regarding the subject...n it feels gud when sumthing u've recognised practically is already in the books of some select authors...yo!!! :)
CA D. Singhal
(CA )
(490 Points)
Replied 15 October 2011
Thanks a ton Deepti, At last my querry got a legitimate answer..... That is; Yes Experience/Learning results in reduction of Cost per unit and it is governed by "Experience Curve"...
PF & ESI Course - Labour Code 2019 Along with Examples and Case Studies