Quantitative Analysis in Budgeting Flashcards Preview

ACCA F5: Performance Management > Quantitative Analysis in Budgeting > Flashcards

Flashcards in Quantitative Analysis in Budgeting Deck (10)
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What is the learning effect theory?

As cumulative output doubles, the average time to produce a unit falls by a given rate.


What is the formula for the learning effect?

Y = ax^b

Where b = log r / log 2


What is the high low method?

Used to calculate the amount of variable and fixed cost within a semi-variable cost


What are the 4 steps for the high-low method?

1. Take the highest and lowest output levels
2. Find the difference
3. Calculate the variable cost per unit
4. Calculate the fixed cost.


What conditions must be present for the learning effect to hold?

All must apply:
1. Significant manual element
2. Repetitive Task
3. Early stage of production
4. Consistent workforce
5. No breaks in production
6. Motivated workforce


What is the steady state of the learning effect?

The steady state is reached when no further improvements can be made

The time taken per unit is constant.


What is the experience effect?

The experience effect applies to other costs which may also reduce as the workforce gains experience;
- materials
- variable overheads
- fixed overheads


What are the problems with the learning effect?

- How to calculate the rate
- Is the rate really constant?
- When will production reach a steady state.


What is the formula to reverse engineer the learning rate?

batch total hours = first batch hours x r^x x number of batches made

where r^x is the rate to the power of an indice of 2.


How do we find the nth batch?

use y = ax^b

for the nth batch and the n-1 batch and calculate the difference.