Advanced : Learning curves In some kinds of specialized manufacturing operations, involving for example difficult or even unique design or production problems. it is suggested that production costs may follow what is known as the

'learning curve phenomenon' as more units of the same kind are produced. You are required :

(a) to explain the following two statements, to discuss their possible implications. and to assess the1r significance:

(1) when the production costs of a product follow the learning curve phenomenon the ratio of actual production costs to units produced declines over the product's life cycle, the production process having two joint products-one physical and the other intangible,

(5 marks)

(2) with constant selling prices, attaching actual production costs to individual units for a firm whose production costs follow the learning curve phenomenon means that the firm's reported earnings will depend on the current stage of the product's life cycle; (5 marks)

(b) to present a table of production times showing the following columns for E. Condon Ltd, which produces up to 16 units while experiencing a 90% learning curve. the first unit requiring 1000 hours of production time:

(1) units produced,

(2) total production time (hours).

(3) average production time per unit in each successive lot

(hours),

(4) cumulative average production time per unit (hours), and

(5) percentage decline in (4).