CMA Final · Strategic Cost Management · Benchmarking
Mehta Logistics has a delivery cost of Rs 18 per parcel at a volume of 6,00,000 parcels. A benchmark partner achieves Rs 15 per parcel. Mehta judges that only 70% of the gap is achievable because of its hilly routes (structural difference), and implementing changes costs Rs 4,20,000 one-time. What is the net saving in the first year?
The net first-year saving is Rs 8,40,000. Only 70% of the Rs 3 gap is achievable, giving Rs 2.10 per parcel, or Rs 12,60,000 on 6,00,000 parcels. Deducting the one-time implementation cost of Rs 4,20,000 leaves Rs 8,40,000.
- ARs 8,40,000Correct
- BRs 12,60,000
- CRs 18,00,000
- DRs 13,80,000
Explanation
Gap = 18 - 15 = Rs 3 per parcel. Achievable = 70% x 3 = Rs 2.10. Gross saving = 2.10 x 6,00,000 = Rs 12,60,000. Less one-time cost 4,20,000 = Rs 8,40,000. Rs 12,60,000 ignores the implementation cost; Rs 18,00,000 uses the full gap and ignores both adjustments.
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