Learning Curve is a matthe matical concept that graphically depicts how a process is

improvet over time due to learning and increased proficiency.

A learning curve typically described w/ a percentage that Identifies the rate of improvement.

→a Steeper slope indicates mithal learning that translates into higher cost savings and
cubsequent leavning result in increasing slower, move dificult lost savings key points

• The learning curve is a representation of how long it takes to gequire new skills on
knowledge

•In business, the slope of the learning cowe represents the vate in w/k learning new stalls
translato in to cost savings. for a company

•f learning curve is usually described w/ a percentage that identifies the rale of improvement

• the Idea behind this is that any. emplonce, regauntless of position, takes time to learn how
to carry out a specific task on duty. The amount of time needed. to produce the associated
output is high. Then, as the task is repeated, the earployee leans brow to complete it quickly
and that reduced the amount of time needed for a vuit of output.

leaving corve formula:

Y = ax

where

Y = Cumulative auxerage time per unit or batch

a = Time talan to produce initial quantity.

X = The cumulative wits of production or the cumulative member of batches

b= The slope or learning curve Index, calan latest as the log of the legunikuy wrve % divided
by the log of 2

Example

let's use an 80% learning curve as an example. This means that every time we double the
cumulative quantity, the Process becomes 20% home eftiment. In addition, the first task we
complete

tork loou hours

Comulative

2
3

lumulative productiontime

L. Ave. Hame bevand

Jincomentel Time

1000 his

1000 hus

Vorohrs

1600 hrs

500 GRA

Goon's

2560hrs

640 hrs

960 his

Banefits:

Lompanies know how much an employee sves terhour and our derive the cost a singe can
we - output boiled on the wow her f wait of outpo Cour's needed duell praced amplive int If
outply over time. Core becautivy, VVICTORY OF LOTIALC

DATE:

Sample Problery.

Cumulative Number

of wirts Puanced

#1

Cumulative
Induidual

Comulative total

Cumulative

Unch time for the

Avevage team

Prodrad

th vilt

Time

Per Vait

100

100

100

86

90

64

314.21

78.55

51.20

574.59
#2

ACE

The average labor cost per unct for the first batch produced by a new process is P120.10.
The wmulative avevage labor cost after the secont batch is P72, no per Product. Using a
batch size of 100 and assuming the learning curve continues, The total labor cost of four
batches will be ?

Deasion Tree Analysis

Involves visually outlining the Potential outcomes, costs and consequentes of a complex
decision. Thise trees anl particularly helpful for analyzing quantitative data and making a
decision based on numbers.

Deasion tree analysis can help you visualine the impact your deasions will have so you can
find the best course of action.

Flowchart that starts with one main Idea and then branches out based on the consequences
of your decisions. Its called a dea sion tuee because the model typically looks like a tree of
lavanches Syntaals

Alternative branches:

Alternative branches are two lines that branch out from one docasion on the deasion tree

Deasion nodes squares, remesents a decision being made on your tree. Chana nodes
gardes, shows multiple possible outcomes.

End nodes -triangle, show a finaloudarome Uses

Operations, budget, planning, project Ce.g. determine wla project is most cost effective,

Sample Problembu ковдру

Youn firm is deading to invest in one of the products. A su B Product A will lost $2300 to
develop and there's a 60% chance' it will generate $700,10 and a 40% chay that it will tose
$100. Product B costs #50% to develop, lout has a 70% chance of earning 9960 for the firm
and a 303 chance of losing $200, 10 the Expeded Monetary Valce what is the of the two
products?

* w/o should your firm invest in?

3300

607+700
40

-100

ACE

-506

70+900

20

-200

EMVA = (-300) 160 (900)+.40 (-100)

$80

IMV = (-500)+.70 (900) + 40(200)

Expected valve/Decision Tree

→For deasion involving risk, the Concept of expected valve provides a vational means for
selecting the best alternative. The expected value of an action is found by motiplying the b
probability of each outcorne by its payoff and summing the products.' → the EU is calculated
by multiplying each of the possible out comes by the likelihood each outarme will ocair and
the summing all of those valves. Key points

• In Invecting, the expected value of a stock or other nwestment is an important

consideration and is used in senario analisis • EU can help investors, sice up wether an
investment's risk is worth the potential reward.

Scenario Analysis is one technique for calculating the EV of an Investment opportunity.

is a process of analysey future event by consitering affermative posible outcome (not relying
histoneal da eng. Electric cars

Contingency tunds to rutigate risk and mating infirmed decision