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Statistical Methods for Learning Curves and Cost Analysis

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Technical Report

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CNA Corporation Alexandria United States

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In this chapter, we first discuss statistical methods for estimating cost progress or learning. We use these two terms interchangeably to describe a reduction in unit production cost as more items have been cumulatively produced over the course of a manufacturing program. Some older works defined the term learning in a much narrower sense, to encompass only the reduction in manufacturing labor hours as workers learn to perform repetitive tasks faster or with fewer errors. Most modern authors have expanded the concept of learning to include redesign of the production process itself, perhaps changing the tasks that workers perform or complementing those workers with improved automation. In addition, as a production program unfolds, manufacturers may find cheaper suppliers, or enter into long-term contracts under which they enjoy quantity discounts from suppliers. We retain the older term learning without much concern for whether the source of the unit cost reduction is confined to production workers performing repetitive tasks, or extends to some other economic or technological factors. We also use the term learning curve to describe the mathematical relationship between unit production cost and the cumulative quantity produced. 1

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