# MGT364 test2 - Ch7s Coefficient method price will be...

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Ch7s Coefficient method: price will be smaller and smaller when unit # is increased Learning curve o Pattern of improvement over time o Practice makes faster o Discovered in aircraft production 1930’s o Same principle applies in other industries o Industry tends to be consistent: Model-t 86%; aircraft 80%; calculators 74% o Goal for learning curve: plan for long run stability o Learning with interruptions Interruptions may create a scallop effect in the curve o Applications of learning curves Manpower planning and scheduling Negotiated purchasing Pricing new products Budgeting, purchasing, and inventory planning Capacity planning Personnel placement o How does a learning curve work? As production doubles, consistent % savings Learning curve score… percentage time savings Learning curves are like golf scores Estimate from pilot run or prior experience T1 is important base for estimates Unit factor or cumulative factor for estimates o Find value, and determine x; find value on the table (table of unit value) calculate o Find value, and determine x; find value on the table (table of cumulative value) Calculate o # of week calculation Set 40 hours/week Without learning curve: ( T1*# of unit ) / 40

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With learning curve: CF / 40 # of units in week 1: 40 = T1 * CF ; CF = 40 / T1 ; then, find # on cumulative table o Reasons that using a learning curve Improves information for scheduling, pricing, negotiation, and supplier development Costs drop; efficiency goes up Prevents overestimate of total labor Prevents underestimate of material needs o Reasons that not using a learning curve Only applicable to direct labor Not transferable Dependent on early-run accuracy Estimate! Check for validity Changes in process, product, personnel Interruptions Ch4 Design o Translate customer needs into our output requirements Refine existing Develop new o Formulate objectives, such as quality goals, and cost targets o Construct and test prototypes o Document specifications (specs) Why would anybody do this? o Cost or availability o Economic, technological, product life cycle (introduction, growth, maturity, decline) o Social and demographic o Political, liability, legal, environmental o Competitive Product life cycle stages o Limited models; quality; product and process changes; short runs at high costs; skilled labor o Growth: MKT critical
Competitive improvement; product and process reliability; forecasting and distribution o Maturity: competition Standardization; cost-cutting; automation; long-runs; stable processes at high volume o Decline: money control Reduce line; little differentiation; cost minimization; reduce overcapacity; spare parts market Design strategy o Product and service design - or redesign – should be closely tied to an organization’s strategy

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## This note was uploaded on 10/13/2011 for the course MGT 101 taught by Professor Karen during the Spring '11 term at Missouri State University-Springfield.

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MGT364 test2 - Ch7s Coefficient method price will be...

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