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. 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. At the last of the financial year, they found that their products did not reach the market on time and due to which sales reduced and its per product cost is ₹95.

What is the difference between the selling price and cost of solar light and because of this difference company was called what?

5, Efficient

The correct answer is Option 1- 5, Efficient

• As the price is setup by the company is 100 but the cost came up at 95 means 5 is the difference.

• Company is not effective as product does not reach market on time.

• This difference makes the company efficient as efficiency means doing the task correctly and with minimum cost.

Efficiency means doing the task correctly and with minimum cost. There is a kind of cost-benefit analysis involved and the relationship between inputs and outputs. If by using less resources (i.e., the inputs) more benefits are derived (i.e., the outputs) then efficiency has increased. Efficiency is also increased when for the same benefit or outputs, fewer resources are used and less costs are incurred.

Effectiveness versus Efficiency: These two terms are different but they are interrelated. For management, it is important to be both effective and efficient. Effectiveness and efficiency are two sides of the same coin. But these two aspects need to be balanced and management at times, has to compromise with efficiency. For example, it is easier to be effective and ignore efficiency i.e., complete the given task but at a high cost. Suppose, a company’s target production is 5000 units in a year. To achieve this target the manager has to operate on double shifts due to power failure most of the time. The manager is able to produce 5000 units but at a higher production cost. In this case, the manager was effective but not so efficient, since for the same output, more inputs (labour cost, electricity costs) were used.