cost estimation

learning curve

• labour learns by experience

  average hours per unit decrease as production levels increase learning effect that diminishes over

• only happens when labour can be learnt, influences the time taken and sets the pace for production

  labour intensive tasks

• usually trivial tasks, but repetetive

  staff must be motivated

calculating learning curves

• calculated from a % learning rate, usually 80-90

  dependant on industry

• as cumulative labour doubles, the hours decrease by the % learning rate of the previous average

estimation of labour costs

• choose correct learning rate

• wary of amount of reliance placed on employee’s abilities

• account for unforeseen breaks in work schedule

• individuals and production methods may change

LRUC

information for labour costs

• total labour costs of product

• number of employees for product

• rate of labour wage

• labour requirements per unit

• correct learning rate

LEWLC

high low method

• analyses behaviour of costs

  used to estimate fixed and variable parts of cost

• semi variable costs can also have fixed and variable elements

• considers how activity levels affect variable costs

• think about if there is a stepped fixed part, dependant on activity

BESCS