# 9 Quantitative analysis Flashcards Preview

## F5 Performance Management > 9 Quantitative analysis > Flashcards

Flashcards in 9 Quantitative analysis Deck (7)
1
Q

What are the advantages of high/low method?

A
• The high-low method has the enormous advantage of simplicity
• It is easy to understand and easy to use
2
Q

What are the disadvantages of high/low method?

A
• It assumes that activity is the only factor affecting costs
• It assumes that historic costs reliably predict future costs
• It uses only two values, the highest and the lowest which may be distorted due to random variations.
3
Q

What does Wrights Law state?

A

States that as cumulative output double, the cumulative average time per unit falls to a fixed percentage of the previous average time.

4
Q

What is the official definition of the learning curve?

A

The mathematical expression of the commonly
observed effect that, as complex and labour
intensive procedures are
repeated, unit labour times tend to decrease.

5
Q

What is the limitations of the Learning Curve Model

A
• The process needs to be labour intensive
• The product needs to be new
• The product is complex
• Production is repetitive and there is no breaks in production
6
Q

What is the formula for the learning curve?

A
```Y= a * xB
X= Cumulative number of units
Y = Cumulative average time per unit to produce X units
A = Time required for first unit
b = index of learning = logr/log 2```
7
Q

What is the applications of the learning effect?

A
• Pricing decisions - prices will be set too high if based of the costs of making the first few
• Work scheduling - less labour per unit will be required.
• Standard setting - if a product enjoys a learning cost than the standard will be too high.
• Budgeting - the presence of a learning effect should be taken into account when setting budgets