Learning Curve Theory.

T. P Wright of Curtiss - Wright, Buffalo, USA introduced the theory of learning curve.

When the production quantity of a given item is doubled, the cost of that item decrease at a constant rate.

Learning is the process by which an individual acquires skill, knowledge and ability. When a new product or process is started, performance of worker is not at it's best and learning phenomenon takes place. As the experience is gained, the performance of worker improves, time taken per unit reduces and thus his productivity goes up. This improvement in productivity of workers is due to learning effect.

Learning Curve is also known as Experience Curve, Improvement Curve and Progress curve.

The learning effect exist during worker's start up or familiarisation period on a particular job.

After the limits of experimental learning are reached, productivity tends to stabilize and no further improvement is possible.

Learning Curve Ratio

Learning Curve Ratio = ( Average labour cost of first 2N units / Average labour cost of first N unit )

Example

If the average labour cost for first 500 units is $25.00 and the average labour cost for first 1,000 units is $20.00 then,

Learning Curve Ratio = ($20.00/$25.00)X100= 80%

Lower the Learning Curve Ratio is higher the Learning takes place.