A CIMA research report from2011 provides some detail on the use of the learning curve in practice. According to the research, 5 per cent of respondent companies used the technique. On amore positive note, just one-sixth of respondents thought the technique had little value. The two main uses of the learning curve are typically seen as planning/budgeting and product costing, but in the research showed a high degree of usage in target costing. Following an initial survey, six interviews were conducted – three in a manufacturing environment, three in service. All three manufacturing companies used the learning curve for planning and budgeting, while two used it for pricing purposes. One interviewee commented on how the technique is used: ‘I brought this theory to my company after studying it. It has proved to be very useful in estimating how long it will take to make new products and [we are] therefore able to set a more competitive price. This has resulted in higher profits and more contracts won.’ The company, which assembled excavators, is a classic example of the type of firm associated with learning curve use. As new products are brought to market, the employees have to learn how to assemble new parts, and their skills improve over time.

Questions 

1 What kind of obstacles might you face as a management accountant if you wanted to implement the learning curve technique in an organization?

2 Can you think of any service sector use of the learning curve?