Extensions to the Cost Progress Model: An Analysis of Factors Influencing Unit Cost of Weapon Systems

The use of cost progress curves (learning curves) to analyze unit costs experienced during the manufacture of items produced from a repetitive process is widespread. The assumption implicit in the use of cost progress curves is that cumulative quantity produced is the primary factor influencing the pattern of unit costs. This paper adds to the cost progress model variables reflecting production rate, company-wide activity and fixed costs, and industry activity. Empirical tests show that each variable enhances the explanation of unit cost, but the importance of the variables depends on the nature of the cost series being analyzed.