PRODUCTIVITY - TECHNIQUES/

LEARNING CURVE EXAMPLES

Q.1 (April-2014)
(a) National Space Research Agency has developed technology of Satellite
launching vehicle and communication satellite s. It has incurred following
expenses on the first Geosynchronous Launch Vehicle (GSLV -I) and the first
satellite, Comsat -I. The work groups have exhibited 80% Learning Curve on
similar pro jects in the past. A neighbouring nation has expressed intere st in
availing this capability for launching four such satellites in the next launch.
The GSLV-I can launch eight such satellites at a time and the host country
has already decided to launch its own first four satellites. P repare a
quotation for launch of the next four such satellites, giving price per unit. A
profit of 100% on cost is to be considere d. Use Learning Curve principle.
1.GSLV-I
- Material

80,00,000

@ 1/8 per satellite

64,00,000

--

(First unit of GSLV; at

32,00,000

--

actual cost)

- Material

60,00,000

Full

- Labour

48,00,000

24000 hrs @ 200 Rs

- Overheads

24,00,000

- Assembly
Labour
- Overheads
2. Satellite
(Comsat -I)
(80% Learning Curve)
(50% of Labour Cost)

Solution : In this problem there are two cost items, which attract application of
learning curve (i) The Launch vehicle (GSLV) assembly labour (ii)
Satellites, labour part . One GSLV can launch 8 satellites. But in the first
launch it has carried only one satellite.
-

Thus the average labour cost /unit for the first two cumulative GSLVs
Y = 64,00,000 (2) ( l o g 0 . 8 / l o g 2 ) = 51,20 ,000
Total Labour cost for fir st two units of GSLV = 2x51,20 ,000 =102,40,000
Labour cost for the 2 n d unit of GSLV = 102,40,000 -64,00,000=38,40,000
(In the quotation to be prepared per unit of satellite, 1/8 of this, needs
to be considered as one GSLV can launch 8 satellites at a time).

Next, for the 4 units required by the neighbouring country the y would have
cumulative serial nos. 6,7,8,9 i. e. after the 1 Trial satellite and the next four
required by the host country.

PRODUCTIVITY - TECHNIQUES/
LEARNING CURVE EXAMPLES

Total labour cost for first five satellit es,

XY 5 = 48 ,00,000 (5) 1 +

(log0.8 /log2)

= 142,95,2 96 Rs

Also, Total labour cost for first nine satel lites,

XY 9 = 48 ,00,000 (9) 1 + ( l o g 0 . 8 / l o g 2 ) =212,95,423 Rs
Labour cost for the batch of 4 satellite s required by the neighbouring
Country = 212,95,423 -142,95,296 =70,00,1 27 = 70,00,127 Rs
Labour cost per unit of satellite = 70,00 ,127/4 = Rs 17,50 ,031.75
Costing Compilation : (Quotation per unit of satellite launch )
Sr No

Item

Cost

Basis

1.1

The GSLV Material Cost

Rs 10,00,000

(80,00,000 8=)

1.2

GSLV Assembly labour cost

Rs 4,75,000

(38,40,000 8=)

1.3

Overheads of GSLV

Rs 4,00,000

(32,00,000 8=)

2.1

Satellite Material cost

Rs 60,00,000

(at actuals)

2.2

Satellite Labour cost

Rs 17,50,032

(as above)

2.3

Satellite Overheads

Rs 8,75,016

(50% of lab. cost)

Total Cost/satellite

Rs 105,00,048

The quoted price with 100% profit on cost = Rs 105,00,048 + 105,00,048

= R s 210,00,096
Q.1 (April 2015)
(a) National Aeronautical Research Organisation has developed unmanned
drones for military usage. The first drone has following costing. A foreign
military of the region has shown interest in buying ten drones. The first
five drones have been committed to internal defence forces for immediate
deployment. Prepare a quotation (per unit) for the foreign buyer based on
above situation assuming 40% profit on selling price . Ass embly labou r
experience s 90% Learning curve.

PRODUCTIVITY - TECHNIQUES/
LEARNING CURVE EXAMPLES

T-1 : Costing of the first unit of drone:

S No

Item

Cost (Rs

Basis

Lacs)
1.

- Materials & Consumables

52

2.

- Technology cost

40

3.

- Labour Cost

20

1000 hrs @2000Rs

4.

- Tooling Cost

10

5.

- Variable Overheads

30% of Labour

6.

- General Overheads

10

50% of Labour

Solution : Here there are 1 + 5 + 10 = 16 drones in question . We have to

compile quotation for the last 10 drones batch per unit.
Learning curve is applicable only to labour cost only.
Total labour cost for first 6 drones = XY 6 = 20 x 6 ( 1 + l o g 0 . 9 / l o g 2 ) =91.39 lacs
Total labour cost for first 16 drones = XY 1 6 = 20 x 16 ( 1 + l o g 0 . 9 / l o g 2 ) = 209.95 lacs
Total labour cost for last 10 drones = 209.95 - 91.39 = Rs 118.56 lacs
Labour cost per drone = 118.56 10 = 11.856 lacs
Quotation Compilation :
Sr No

Item

Cost (Rs Lacs)

Basis

1.

Materials & Consumables

Rs 52 .000

2.

Technology Cost

Rs 40.000

3.

Labour cost

Rs 11.856

4.

Tooling Cost

Rs 10.000

5.

Variable Overheads

Rs 3.557

(30% of labour cost)

General Overheads

Rs 5.928

(50% of labour cost}

Total Cost/Drone

(as above)

Rs 113.341

Allowing 40% profit on selling price, the quoted price = 113.341/0.6

= Rs 188.90 lacs