A.Data relating to the production of the first twelve units of a new product are as follows.

Time taken to produce the first unit                            15 hours

Cumulative time taken to produce first 12 units         81 hours

The percentage learning effect is closest to

(A) 45%

(B) 55%

(C) 70%

(D) 80%

(E) 90%.

B. ‘The learning curve is a simple mathematical model but its application to management

accounting problems requires careful thought.’

Requirements

Having regard to the above statement:

(a) explain the ‘cumulative average-time’ model commonly used to represent learning curve effects.

(b) sketch two diagrams to illustrate, in regard to a new product, the relative impacts of 70,

80 and 90 per cent learning curves on:

● cumulative average hours per unit,

● cumulative hours taken.

(c) explain the use of learning curve theory in budgeting and budgetary control; explain the

difficulties that the management accountant may encounter in such use.

(d) compare and contrast the learning curve with the experience curve; explain the circumstances

when each may be most relevant.