(a) State the different forms of waste management. 15 marks (b) State the various factors affecting plant location. 15…

Waste management forms. Waste management can be classified by source and by treatment. By source, industrial waste includes hazardous waste such as toxic chemicals, solvents, heavy-metal sludges and spent catalysts, and non-hazardous waste such as scrap metal, paper, wood and packaging; municipal waste includes solid waste like household garbage, market waste and street sweepings, and liquid waste such as sewage and trade effluent; biomedical waste includes infectious, pathological, sharps and pharmaceutical waste from hospitals; and e-waste includes discarded computers, batteries, telephones and electronic components. By treatment, the main forms are landfilling, where segregated non-hazardous waste is buried in engineered sites; incineration, where waste is burned to reduce volume and sometimes recover heat; recycling, where metals, paper, glass and plastics are recovered for reuse; composting, where organic waste is biologically decomposed into manure; and waste-to-energy, where combustible waste is converted into electricity or heat. In India, these forms are applied under the Solid Waste Management Rules, Hazardous Waste Rules, Biomedical Waste Rules and E-waste Rules, with segregation at source, collection, transport, processing and safe disposal.

Plant location factors. Plant location is a strategic decision because it fixes long-run costs and service capability. The principal factors are proximity to raw materials and markets, which reduces transport cost and delivery time; labour availability and cost, including skill, wage rates, labour relations and training facilities; transportation infrastructure, such as roads, railways, ports, airports and logistics connectivity; power and water supply, which must be reliable, adequate and affordable; government policies and incentives, including industrial policy, land rates, tax holidays, subsidies, single-window clearance and special economic zones; environmental regulations, such as pollution control, effluent standards, noise limits and environmental clearances; and agglomeration economies, where clusters provide shared suppliers, skilled labour, services, technology spillovers and market access. For an automobile plant, for example, proximity to component suppliers, port access for exports, skilled labour and industrial infrastructure may outweigh cheap land.

Make-or-buy decision. For brakes, the relevant cost of making is the incremental variable cost: materials ₹100, labour ₹130 and variable overhead ₹30, giving ₹260 per unit. For 5,000 units, variable manufacturing cost is ₹13,00,000. Buying cost is 5,000 × ₹500 = ₹25,00,000. The annual fixed cost of ₹2,50,000 associated with the existing unused capacity is not an incremental cost of making brakes, because it is incurred whether the capacity is used for brakes or left unused; it is therefore a common or sunk cost for this decision. On a relevant-cost basis, making saves ₹500 − ₹260 = ₹240 per unit, or ₹12,00,000 per year. If the fixed cost were wrongly added, total manufacturing cost would appear to be ₹28,50,000 against a buying cost of ₹25,00,000, suggesting a loss of ₹3,50,000; but that comparison is misleading because the fixed cost does not change with the decision. Hence, before considering the alternative use, it would be profitable for the company to manufacture the brakes.

Opportunity cost comparison. If the same capacity can be used by another department to produce agricultural equipment that contributes ₹1,00,000 to profit after covering its own fixed and variable costs, the brakes decision must be compared with that alternative. The brakes option gives a contribution of ₹12,00,000, while the agricultural equipment option gives ₹1,00,000. Since the fixed cost of the capacity is incurred in either case, it should not be deducted from either option. The brakes production is therefore more advantageous by ₹11,00,000. The decision illustrates the operations-management principle that make-or-buy and capacity-allocation decisions should be based on relevant, avoidable costs and opportunity costs, not on allocated common fixed costs. Thus, the company should use the additional capacity for brake manufacture rather than agricultural equipment.