Learning curve
In one sentenceThe fall in the time needed to produce a unit as work is repeated, because workers gain experience, so labor cost falls for later units.
Simply put
In an 80% learning curve, for example: each time the number of units produced doubles, the average time per unit falls to 80% of what it was.
It helps you price long contracts: do not calculate every unit at the time the first unit took, or you will overprice.
Worked example
A metal structures workshop needed 100 hours for the first structure and works on an 80% learning curve (based on cumulative average time).
One unitAverage 100 hours, total 100 hours
Two unitsAverage 100 × 80% = 80 hours, total 160 hours
Four unitsAverage 80 × 80% = 64 hours, total 256 hours
Hours for four structures instead of 400 hours256 hours
Formula: New average = previous average × curve percentage each time quantity doubles