Answer to Question #296792 in Management for SWOT

Question

As a firm believer in the idea of sustainability, you were able to

discover a cheap and efficient technology of recycling plastic bottles and

single use bags into various products. To make this technology a profitable

business opportunity, your firm collaborates with Adhuna Ltd. which is in

the production of plastic helmets for construction purposes and plastic

durables for households. Given this product range, your firm has the

following two production opportunities:

● In the first case your estimated annual revenue is Rs. 2,50,000, and

the production will cost you Rs. 80,000.

● In your second option, you expect to sell 2000 helmets every year at

Rs. 100 each, and the average total cost of every helmet will be

Rs.20.

Required:

a. Which production opportunity will you choose and why?

b. If you do so, what will be your economic profit?

Answer 1

a. Which production opportunity will you choose and why?

In the first opportunity, the firm will make a profit of Rs 170,000(250,000-80,000)

In the second opportunity, the firm will make a profit of Rs 160,000(2000*(100-20))

I would therefore choose the first of opportunity of making a profit of Rs 170,000 compared to Rs 160,000. It is also economically and environment sustainable since it avoids wastage of bottles and littering the environment.

b. If you do so, what will be your economic profit?

The economic profit would be Rs 170,000.