Jim:
[I said] However, a company cannot constantly cut costs to increase margins and earnings.<<
[You responded]Then you don't understand learning curve performance.
I remember the learning curve quite well. Remember, I said constantly. The learning curve is really part of the law of diminishing returns. I looked it up in Engineering Economy, Ninth Edition, by Degarmo, Sullivan and Bontadelli and on page 330-333, it describes the learning curve.
On Page 331, Paragraph 2, Degarmo states:
if 100 labor hours are required to produce the first outut unit, and a 90% learning curve is assuemd, then 100(0.9)=90 labor hours would be required to produce the second unit. Similiarly, 100(.9)^2 = 81 labor hours would be needed to produce the fourth unit, 100(0.9)^3=72.9 hours to produce the eight unit, and so on.
Don't you see that the number of hours saved is decreasing?
Furthermore, prove to me a company with flat revenues that has continually lowered costs to increase their profitablity.
dave |
