In the following discussion and applications, we focus on direct labor hours per unit, although we could as easily have used costs. When we develop a learning curve, we make the following assumptions:
The direct labor required to produce the unit will always be less than the direct labor required for the nth unit.
Direct labor requirements will decrease at a declining rate as cumulative production increases.
The reduction in time will follow an exponential curve.
In other words, the production time per unit is reduced by a fixed percentage each time production is doubled. We can use a logarithmic model to draw a learning curve. The direct labor required for the nth unit, is