How to Calculate an Experience CurveIn its simplest form, the experience curve (EC) represents the relationship between cost and volume when accumulated volume has doubled. The slope of the experience curve when accumulated volume has doubled equals 2α. This formula implies that, each time the accumulated volume in units of the product doubles, costs drop by 1-2α. EC = 1 - 2α, where α= (log C2– Log C1) / (log AV2– log AV1)Where C1= Total costs less raw material costs per unit of output in real dollars in period 1C2= Total costs less raw material cost per unit of output in real dollars in period 2AV1= Accumulated volume in period 1AV2= Accumulated volume in period 2Converting nominal or current dollars to real dollars:Real dollars = (Nominal Dollars / Price Deflator) x 100Calculating accumulated volumes: Add annual volume and take a cumulative total each yearYearAnnual DataAccumulated Data1996 12 121997 14 261998 10 361999 15 512000 20 71 Example: Computer Corporation of America produced .1 million units in 1990, its first year of
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