Detailed Answer
The total number of direct labor hours required to produce 8 units is:
10,000 (2 × 0.80) (2 × 0.80) (2 × 0.80), or 10,000 (2 × 0.80) , which equals 40,960 hours.
The cumulative average direct labor hours required per unit of the product will be 40,960 ÷ 8, or 5,120 hours.
The average number of hours per unit under the Cumulative Average-Time Learning Model can also be
calculated by multiplying the time required for the first unit by the learning curve percentage raised to the
appropriate exponent. For this problem, the calculation would be 10,000 × 0.80 = 5,120.
Use of that formula can be confusing, however, since that same formula with those same amounts also
results in the amount of time required to manufacture the eighth unit under the Incremental Unit-Time
Learning Model. If you use that formula for a Cumulative Average-Time Learning Model problem, make sure
the question is asking for the average number of hours per unit, not the amount of time required to
manufacture the last unit.