Question

Complete the definition of learning curve. Select two models that can be used when incorporating learning into the estimation of cost?

1) Cumulative Average Model and Incremental Unit Time Model
2) Cumulative Average Model and Incremental Unit Cost Model
3) Cumulative Average Model and Cumulative Unit Time Model
4) Cumulative Average Model and Cumulative Unit Cost Model

Answer 1

The two models that can be used when incorporating learning into the estimation of cost are the Cumulative Average Model and the Incremental Unit Cost Model, which both recognize efficiency improvements as experience with production increases.

Step-by-step explanation:

The definition of a learning curve in the context of cost estimation involves understanding how costs change as production experience increases. Two models that can be employed when incorporating this learning into cost estimation are: 1) the Cumulative Average Model and 2) the Incremental Unit Cost Model. The Cumulative Average Model takes into account the cost reductions that occur as more units are produced, and the average cost per unit decreases. The Incremental Unit Cost Model, on the other hand, focuses on the cost of producing each additional unit considering the potential efficiencies gained from learning. Both models utilize the principle that repeating a task can lead to improved efficiency and reduced costs over time.