CMA Final · Strategic Cost Management · Benchmarking
Kaveri Auto Components has an order-processing cost of ₹240 per order. The best-in-class firm benchmarked has ₹150 per order. Kaveri handles 12,000 orders a year. If Kaveri closes 60% of the gap, what annual saving results?
The annual saving is ₹6,48,000. The cost gap is ₹90 per order, 60% of which is ₹54, and multiplying by 12,000 orders gives ₹6,48,000. Closing the whole gap would save ₹10,80,000, but only 60% is targeted.
- A₹6,48,000Correct
- B₹10,80,000
- C₹4,32,000
- D₹7,20,000
Explanation
Gap = 240 - 150 = ₹90 per order. 60% of the gap = ₹54. Saving = 54 x 12,000 = ₹6,48,000. The figure ₹10,80,000 comes from closing the full gap, which ignores the 60% target.
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