Material quantity price breaks using company history. Because both cases are single lot batches, and are within a factor of two in quantity, only a small learning curve or production rate adjustment likely is required. You are considering building some equipment for the first time. Relevant labor effort history relates to equipment built some time ago but reliable data is only available from the third lot, beginning at unit 250. This history is considered the best available.
Normalization here requires two steps.
These data points will have to be normalized to some common condition and the resulting improvement curve applied to the case at hand. Lots Rate of Prod . For instance, there is some suggestion that the fewer the number of lots, the steeper the learning curve. In this situation, the analyst could break up the production history and examine the relationship of the learning curve to the lot sequence, the quantity, and the production rate. The date may reflect the technology involved and any historical comparisons will have to include the impact of relevant technology.