Unit Costs And Use Of Midpoints

The use of the learning curve is dependent on the methods of recording costs that companies employ. An accounting or statistical record system must be devised by a company so that data are available for learning curve purposes. Otherwise, it may be impossible to construct a learning curve. Costs, such as labor hours per unit or dollars per unit, must be identified with the unit of product. It is preferable to use labor hours rather than dollars, because the latter contain an additional variable—the effect of inflation or deflation (both wage-rate and material cost changes)—that the former does not contain. In any event, the record system must have definite cutoff points for such costs permitting identification of the costs with the units involved. Most companies use a lot-release system, whereby costs are accumulated on a job order in which the number of units completed are specified and the costs are cut off at the completion of the number of units. In this case, however, the costs are usually equated with equivalent units rather than actual units. Because the job order system is commonly used, the unit cost is not the actual cost per unit in the lot. This means that when lots are plotted on graph paper, the unit value corresponding with the average cost value must be found.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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