The learning curve – real life application

I have previously written about the learning curve and its use in management accounting practice. The learning curve effect refers to a possible tendency for tasks to be performed quicker as employees learn them and become more efficient. Thus, over time, costs may decrease. The term experience curve is also used to describe this effect – have a look at the previous post for detail on how to calculate the learning curve effect.

In October 2012,  CIMA reported some research on two cases of actual use of the learning curve. The full details can be found here , but I will summarise them briefly here. Pricing was a key issue for one case, so they used the learning curve in their cost and pricing calculations to ensure they were giving customers the most competitive price. In the second case, the learning curve effect was used in investment evaluation to obtain the best future cash flow projections.