If raw material price suddenly increases, what should be an appropriate step by an entrepreneur?
Answer and explanation
Correct answer: Recalculate cost and consider price or source options
A rise in raw-material price changes the unit cost and may reduce the expected margin. The entrepreneur should recalculate total cost, check suppliers and alternatives, review waste, and decide whether a fair price or product change is needed. Secretly reducing quantity, damaging quality, or destroying records is dishonest and risky. Hence, A is appropriate.
Frequently asked questions
What is the correct answer to this question?
Recalculate cost and consider price or source options
Why is this the correct answer?
A rise in raw-material price changes the unit cost and may reduce the expected margin. The entrepreneur should recalculate total cost, check suppliers and alternatives, review waste, and decide whether a fair price or product change is needed. Secretly reducing quantity, damaging quality, or destroying records is dishonest and risky. Hence, A is appropriate.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
