Read the following passage and answer the question.

ABC Ltd set up a factory in a remote village U.P. to manufacture solar lights because there was no good source of electricity. It priced its solar light at ₹100 per piece while the cost of production was Rs 94 per unit. After setting up the factory, they noticed that demand was increasing day by day so they decided to increase production so that high sales could be generated. To increase sales, a Production manager named Ayush carries out the plans as framed by his superior. The company also decide to employ people from the nearby villages as there were very few job opportunities in those areas. It also opened schools for the children of its employees. As a result of the additional efforts, economies of scale were achieved and the cost per unit came down to Rs 93 per unit. However, by the end of financial year, though the production was increased, the management found that their products did not reach the market on time and due to which sales could not be increased as expected.

What we can say about the company from the above case study?

The company is efficient but ineffective

The correct answer is Option 4- The company is efficient but ineffective

Explanation:

• Efficiency refers to minimizing costs and maximizing output with given resources.

  • The company reduced the cost per unit from ₹94 to ₹93 due to economies of scale, which shows efficient use of resources.

• Effectiveness refers to achieving the desired goals or outcomes.

  • The company aimed to increase sales by producing more, but due to distribution delays, the products did not reach the market on time, preventing the expected increase in sales.

  • This means the company failed to achieve its intended goal, making it ineffective.

Thus, the company is efficient (due to cost reduction) but ineffective (because sales did not increase as expected).