Estimating Costs With Curvilinear Analyses For Learning

Abstract

Even when the underlying mathematical relationship for the learning curve is a power function, most popular accounting textbooks perform a logarithmic transformation of the learning curve into a linear relationship.  This transformation allows students to perform linear regression techniques; however, accounting students may be left with the misconception that all costs are linear.  With the enhanced capabilities of spreadsheets, accounting students can now easily perform curvilinear analysis on historical learning data and then forecast costs where learning is present.  The Smart Missile Company exercise illustrates this spreadsheet approach to teaching learning curves.