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CSEET · Business Laws and Management · Functions of Management

Ravi Foods meets its monthly production target in full, but only by using 30% more raw material and overtime than budgeted. Which conclusion about management is most accurate?

The firm is effective but not efficient. It achieved its production target, which shows effectiveness, but it consumed far more raw material and overtime than budgeted, so it did not obtain the output at minimum cost, which means efficiency was lacking.

  1. AIt is both effective and efficient
  2. BIt is effective but not efficientCorrect
  3. CIt is efficient but not effective
  4. DIt is neither effective nor efficient

Explanation

The target was achieved, so the firm is effective. Resources used exceeded the budget by 30%, so the output was not obtained at least cost, meaning it is not efficient. Efficient-but-not-effective would need low cost with the target missed, which is the reverse.

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