Question three examined learning curves in conjunction with planning and operational variances. Part (a) was purely calculative and well answered by many candidates.

Firstly, it was necessary to work out what the revised average cumulative time per hour was for the actual 460 hours worked, which many candidates managed to do.

When errors were made here, it was mainly because candidates worked out the revised average cumulative time per hour for 1,000 hours rather than 460 hours. Again, this error was made because of incorrect reading of the question.

The question stated that a learning curve should have been anticipated for the first 1,000 hours, but since only 460 hours were worked, it was the revised cumulative average time per hour for 460 hours that was required. There were no major problems in calculating the variances, however, which was good to see.

Part (b) was the discursive part to the question. The requirement asked for a discussion of the likely consequences arising from the production manager’s failure to take into account the learning effect.

Answers here were weak. Many candidates identified that the budgeted hours would have been too high originally but they did not go on to consider the implications of that, such as the erroneous recruitment of temporary workers that would be sitting idle, costing the company money and eroding
profits.

Or that the overstated hours per unit would mean the budgeted cost and hence the selling price would also be too high, leading to lower sales volumes.

When answering this type of question involving consideration of consequences, always ask yourself: why should we care, why is this important? This will help ensure that the implications of the observations being made are also considered in order to earn the marks available.