The following learning curve guidelines are based on statistical analyses averaged over various industries and time periods. On average, learning rates are expected to vary depending on the proportion of work performed by workers (hand assembly) versus the proportion performed by machines:

Learning Rate

75% hand assembly and 25% machining ..80%

50% hand assembly and 50% machining ..85%

25% hand assembly and 75% machining ..90%

The managers of Fancy Furniture decided to start a new product line. When the production line was started, it took 10 hours to make the first batch of six chairs. The learning rate is estimated to be 90%.

REQUIRED

A. Estimate the cumulative average time per batch to make four batches.

B. Identify possible reasons why the actual learning curve might be different from the estimate in part (A).

C. Explain how you might use the learning rate guidelines in the preceding chart to evaluate the reasonableness of the learning rate for Fancy Furniture.

D. What problems would arise if information for the first few weeks of production were used in a regression analysis to estimate a cost function for the new product line?