Reference no: EM132667659

The production manager believes that cost efficiency has improved due to experience in production (learning). But she notes that unit costs are also directly a function of current production, and that because production ramped up over time, there may be a confounding effect on the learning curve estimate. Explain briefly what she might have in mind. Which direction would the bias go- that is, is the simple regression's learning effect overestimated or underestimated? Might the bias go in either direction? If so, what about costs would determine the direction of the bias?

-Address the manager's concern using multiple regression to control for the confounding effect. Explain what variable or variables you add to the simple learning curve and why.