Skip to content

CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

Ananya Textiles has a cost per metre of fabric of ₹80 and a best-in-class benchmark firm has ₹64 per metre. It plans to close 75% of the gap through process changes. It produces 2,00,000 metres a year. What annual cost saving would the plan deliver if the target is met?

The annual saving is ₹24,00,000. The gap to the benchmark is ₹16 per metre, 75% of which is ₹12 per metre. Multiplying ₹12 by 2,00,000 metres gives ₹24,00,000. Closing the full gap would give ₹32,00,000, which is not the target.

  1. A₹24,00,000Correct
  2. B₹32,00,000
  3. C₹3,20,000
  4. D₹16,00,000

Explanation

Gap = 80 − 64 = ₹16 per metre. Closing 75% gives 0.75 × 16 = ₹12 per metre. Annual saving = 12 × 2,00,000 = ₹24,00,000. The ₹32,00,000 option closes the full gap, ignoring the 75% target. ₹16,00,000 multiplies the gap wrongly by 1,00,000 metres.

Did you get it right without looking?

One question tells you little. A timed set on Managing the Multi-Business Firm and Analyzing Strategic Edge shows your real accuracy, how long you take and where you lose marks.

Practise Managing the Multi-Business Firm and Analyzing Strategic EdgeFree diagnostic mock

More Managing the Multi-Business Firm and Analyzing Strategic Edge questions