CMA Foundation · Fundamentals of Business Economics and Management · Introduction to Management
A firm's management reduces cost per unit from ₹50 to ₹40 by better planning while quality stays unchanged. Output was 10,000 units. Which statement is correct about the effect?
The total saving is ₹1,00,000, which illustrates increased efficiency. The unit cost falls by ₹10 (₹50 minus ₹40), and multiplying by 10,000 units gives ₹1,00,000, achieved by better planning without any loss in quality.
- ATotal saving is ₹1,00,000, illustrating increased efficiencyCorrect
- BTotal saving is ₹10,000, illustrating group goals
- CTotal saving is ₹5,00,000, illustrating adaptation to change
- DTotal saving is ₹4,00,000, illustrating social objectives
Explanation
Saving per unit is 50 − 40 = ₹10; for 10,000 units the saving is ₹1,00,000. Lower cost with unchanged quality reflects increased efficiency. The ₹4,00,000 figure wrongly uses the new unit cost, and ₹5,00,000 uses the old cost.
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