Applying the Learning Curve Theory

Alternatives to the normal process means one or more distinct processes, some historic and some newly designed, each having to do with the processing of the final product for different effects, precision and results. The learning curve on the other hand shows the association between the cost of producing a widget or completing a task and the number of units produced or tasks performed over a period of time. The learning curve is represented graphically by plotting the average rate of learning for an activity. It also shows the initial difficulty of learning something and what needs to be learned after the initial acquaintance.

When an alternative process to the normal is taken up there is an effort required to acquire the new expertise. This expertise is acquired over a period of time. The learner is require to reorient his way of thinking as with the alternative process, the learning curve is sharp because of the mental tension of understanding the new process rather than the time or the bodily effort required. It is relatively easy to envisage the exertion and skill required for starting using the alternative process, however, achieving mastery over the alternative process is complex, time consuming and takes much more attempts than making initial use of the new process. This is exactly the reason why the new process data is irrelevant for pricing decisions. If the initial new process data is used for pricing decisions, the company will not gain cost advantage.

From a different perspective the learning curve depicts how labor-hours per unit of production fall as units of production increase. The learning curve presumes that the mean time taken to produce a widget comes down by a percentage every time the production is increased two fold. The learning curve further presumes that marginal time for producing a widget is reduced when production is doubled. When an alternative to the process is used, the initial data collected will be related to an earlier stage...