Question

"Only a 5% increase in labor cost may be more troublesome than a 15% increase in postal charges."Identify the concept pointed out in the statement.

• A. Deviation
• B. Critical point control
• C. Break-even analysis
• D. Critical path method

Answer 1

The Correct Option is B

"Only a 5% increase in labor cost may be more troublesome than a 15% increase in postal charges." This statement highlights the concept of Critical Point Control.

In business management, Critical Point Control refers to focusing on the areas of greatest significance where even small deviations can have substantial impacts on the overall performance and objectives of a business. It involves identifying and monitoring these critical areas to ensure control measures are implemented effectively. In this context, while postal charges may increase by a larger percentage (15%), their impact on the business might not be as significant as a 5% increase in labor costs. Labor costs could be a more critical point affecting the business's bottom line due to its potential impact on overall productivity and operational expenses.

Answer 2

To identify the concept pointed out in the statement, let's analyze the statement and each option in detail:

Statement Analysis

The statement says, "Only a 5% increase in labour cost may be more troublesome than a 15% increase in postal charges." This suggests that there is a specific point (or threshold) at which a small change in one factor (labour cost) can have a more significant impact than a larger change in another factor (postal charges).

Options Analysis

Deviation (1)

Definition: Deviation refers to the difference between the actual performance and the set standards or expected performance.

Why Not: The statement is not about the difference between actual and expected performance but about the impact of changes in different factors.

Critical Point Control (2)

Definition: Critical point control is a concept in management where certain key points or thresholds in a process are identified and monitored closely. These points are critical because they can significantly affect the outcome.

Why Correct: The statement suggests that a small increase in labour cost (a critical point) can have a more significant impact than a larger increase in postal charges. This aligns with the concept of critical point control.

Break-even Analysis (3)

Definition: Break-even analysis is a financial tool used to determine the point at which revenue equals costs, resulting in no profit or loss.

Why Not: The statement is not about the break-even point but about the relative impact of changes in different costs.

Critical Path Method (4)

Definition: The critical path method is a project management technique used to determine the sequence of tasks and the minimum time required to complete a project.

Why Not: The statement is not about project management or the sequence of tasks but about the impact of changes in different costs.

The correct answer is: (2) Critical point control

The statement highlights the concept of critical point control by emphasizing that a small change in one factor (labour cost) can have a more significant impact than a larger change in another factor (postal charges). This suggests that certain points or thresholds in the cost structure are critical and need to be monitored closely.