Learning Curves: Cumulative Average Theory
Gregory K. Mislick, Daniel A. Nussbaum · 2015
This chapter focuses on the second of the two learning curve theories, Cumulative Average Theory (CAT). For an 80% cumulative average learning curve, there is a 20% decrease in average cost each time that the cumulative quantity produced is doubled. The primary difference in the equations is that Unit Theory concentrates on each lot or unit individually, while Cumulative Average Theory calculates the cumulative average cost of all units to date, collectively. When historical production data is available, slope and first unit cost can be calculated by using the learning curve equation. Note that for any given set of data, since cost generally decreases, the Unit Theory cost curve will roughly parallel the Cumulative Average Theory cost curve, but will always lie below it. The chapter explains when one of these theories is preferred over the other and how to make the learning curve selection during cost estimate.