Business Studies class 12 chapter 8 questions and answers Controlling

Class 12 business studies chapter 8 ncert solutions: Controlling class 12 questions and answers

Textbook	Ncert
Class	Class 12
Subject	Business Studies
Chapter	Chapter 8
Chapter Name	Controlling class 12 ncert solutions
Category	Ncert Solutions
Medium	English

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Very Short Answer Type:

Question 1: State the meaning of controlling.

Answer 1: Controlling means ensuring that activities in an organisation are performed as per the plans. Controlling also ensures that an organisations resources are being used effectively and efficiently for the achievement of desired goals. Controlling is, thus a goal oriented function. Controlling is a very important managerial function. Because of controlling manager is able to compare actual performance with the planned performance. In order to control the activities at all levels manager needs to perform controlling function.

Question 2: Name the principle that a manager should consider while dealing with deviations effectively. State any one situation in which an organisation’s control system loses its effectiveness.

Answer 2: The principle that should be adopted to deal with deviations is management by exception. An organisation’s control system loses effectiveness when standards are not able to be defined in quantitative terms. For example, job satisfaction will be different for different employees.

Question 3: State any one situation in which an organisation’s control system loses is effectiveness.

Answer 3: An organization’s control system loses its effectiveness when the standards cannot be defined in terms of quantity. It would be difficult to measure the performance and compare it with the planned performance. This problem can arise in a situation of job satisfaction and employee morale.

Question 4: Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.

Answer 4: The standards that can be used by a company to evaluate the performance of its Finance & Accounting department are:

• Inventories,
• Liquidity,
• Capital expenditures,
• Flow of capital (any two).

Question 5: Which term is used to indicate the difference between standard performance and actual performance?

Answer 5: The deviation is the term that is used to indicate the difference between standard and actual performance.

Short Answer Type:

Question 1: ‘Planning is looking ahead and controlling is looking back.’ Comment.

Answer 1: Planning is the process of creating a structure in advance regarding the work that needs to be done. It is helpful in defining the objectives and goals that need to be achieved by an individual or organisation. Therefore, it is said that planning is about looking ahead, which involves predicting about future. Controlling takes into consideration the assessment of past performance and comparing them with set standards.

Due to these characteristics, it can be said to be a backward-looking future. But all these statements are partially correct, as planning is done based on past experiences and how to do better, similarly controlling although looks at past performance, its aim is to improve future performance. Hence, it can be said that both planning and controlling are forward and backward-looking functions.

Question 2: ‘An effort to control everything may end up in controlling nothing.’ Explain.

Answer 2: It’s a well known fact that “Jack of all master of none” when we start controlling everything it results in controlling nothing because it is not possible at one time to control various activities as this process may neither be economical nor easy.

Control thus focus on KRAs (Key Result Areas). It means instead of controlling all activities, control where the critical points goes wrong and by which organisation suffers. Thus, KRAs are set as critical points and one should be aware that he has to control what.

Question 3: Explain how management audit serves as an effective technique of controlling.

Answer 3: Management auditing is the comprehensive and constructive evaluation of an organization’s management’s overall performance. It aims to improve management’s overall effectiveness and efficiency. It evaluates all of the functions performed by managers and aids in the identification of deficiencies in work performance. The following factors can be used to assess the effectiveness of management auditing for controlling.

i. Identification of Deficiencies: Management auditing assists in identifying current as well as potential deficiencies in performance. As a result, it aids in the implementation of necessary corrective measures.

ii. Increases Efficiency: Management auditing allows various management activities to be continuously monitored. As a result, it aids in improving management’s overall efficiency.

iii. Improves Coordination: As it continuously oversees the work, it improves coordination between employees as well as within the various functions of the organization.

iv. Adapting to Environmental Changes: It assists the organization in appropriately adapting to environmental changes. This is accomplished by ensuring that management policies and strategies are up to date.

Question 4: Mr.Arfaaz had been heading the production department of Writewell Products Ltd., a firm manufacturing stationary items. The firm secured an export order that had to be completed on a priority basis and production targets were defined for all the employees. One of the workers, Mr.Bhanu Prasad, fell short of his daily production target by 10 units for two days consecutively. Mr.Arfaaz approached MsVasundhara, the CEO of the Company, to file a complaint against MrBhanu Prasad and requested her to terminate his services. Explain the principle of management control that MsVasundhara should consider while taking her decision. (Hint: Management by exception).

Answer 4: The principle of management control that MS Vasundhara must consider while making her decision is management by exception. It means that any attempt to control everything results in controlling nothing.

Only those deviations must be brought to notice which are beyond the permissible limit. In this case, Mr. Bhanu hairstyle has fallen short of his daily production target only by 10 units. This is only a small deviation and it is not right to terminate him on the basis of this.

Long Answer Type:

Question 1: Explain the various steps involved in the process of control.

Answer 1: Controlling is a systematic process that ensures actual performance aligns with desired goals. It involves the following steps:

Setting Performance Standards The process begins with establishing performance standards, which serve as benchmarks for evaluation. These standards can be quantitative (e.g., cost, production output, time spent) or qualitative (e.g., employee motivation, goodwill improvement).

Measuring Actual Performance Once standards are set, actual performance is measured objectively using techniques like personal observation, sample checks, and performance reports.

Comparing Actual Performance with Standards The measured performance is then compared against the set standards to identify any deviations. This comparison is straightforward when standards are expressed in quantitative terms, such as units produced per week.

Analyzing Deviations Not all deviations require immediate action. Managers should identify acceptable limits and prioritize critical areas using methods like critical point control and management by exception to focus on significant deviations.

Taking Corrective Action If deviations exceed acceptable limits, corrective actions are taken to align performance with standards. If deviations persist despite corrective measures, the standards themselves may need revision.

Question 2: Explain the techniques of managerial control.

Answer 2: Managerial control techniques help organizations monitor performance and ensure that goals are met efficiently. These techniques can be classified into two categories:

I. Traditional Techniques: These are time-tested methods used for controlling business activities:

1. Personal Observation
   • Direct supervision by managers ensures real-time monitoring.
   • Helps in immediate feedback but can be time-consuming.
2. Statistical Reports
   • Data-driven reports (e.g., charts, graphs, and tables) help analyze trends.
   • Facilitates quick decision-making based on numerical insights.
3. Budgetary Control
   • Setting financial limits for expenses and revenue.
   • Variance analysis helps in comparing actual performance with budgeted targets.
4. Break-even Analysis
   • Determines the level of output at which total revenue equals total cost.
   • Helps in pricing decisions and cost control.
5. Financial Statements Analysis
   • Includes ratio analysis, cash flow analysis, and balance sheet evaluation.
   • Assesses profitability, liquidity, and financial health.

II. Modern Techniques: These are contemporary methods adapted to dynamic business environments:

1. Management by Exception (MBE)
   • Focuses on significant deviations rather than routine performance.
   • Helps managers prioritize critical issues.
2. Return on Investment (ROI)
   • Measures the efficiency of investments in generating profits.
   • A key metric for evaluating business performance.
3. Balanced Scorecard
   • Evaluates performance from four perspectives: financial, customer, internal processes, and learning & growth.
   • Ensures a holistic assessment of organizational performance.
4. PERT (Program Evaluation and Review Technique) & CPM (Critical Path Method)
   • Used for project management to ensure timely completion.
   • Identifies critical tasks and optimizes resource allocation.
5. Total Quality Management (TQM)
   • Focuses on continuous improvement and customer satisfaction.
   • Encourages a culture of quality across all business functions.
6. Six Sigma
   • A data-driven approach to minimize errors and enhance process efficiency.
   • Uses statistical tools for defect reduction.

Question 3: Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?

Answer 3: The following are the importance of controlling in an organisation:

• 1. Controlling helps in achieving organisational goals by optimum use of resources and correcting deficiencies in the process.
• 2. It helps in determining the accuracy of the standards set by management. It also helps in reviewing the standards as per changing business requirements.
• 3. It helps an employee to become motivated as they know what the management expects from them.
• 4. It also enables effective decision-making in the organisation by promoting order and discipline.
• 5. It improves coordination among employees and departments, which helps organisation productivity.

Controlling is effective for management, but there are certain problems that are faced by organisations which are highlighted below:

• 1. The set of standards cannot be set for both qualitative and quantitative terms, as qualitative terms make controlling less effective.
• 2. Changing factors in the business environment result in changing of control mechanisms in an organisation.
• 3. Controlling will be resisted if it is against the comfort level of employees.
• 4. Controlling is a costly affair as infrastructure needs to be set up.

Question 4: Discuss the relationship between planning and controlling.

Answer 4: Planning and controlling are inseparable, they are twins of management. A system of control pre-supposes the existence of certain standards. These standards of performance which serve as the basis of controlling are provided by planning. Once a plan becomes operational, controlling is necessary to monitor the progress, measure it, discover deviations and initiate corrective measures to ensure that events conform to plans.

Planning is clearly a pre-requisite for con-trolling. Controlling cannot be accomplished with planning. With planning there is no pre-determined understanding of the desired performance, planning seeks consistent, integrated and articulated programmes while controlling seeks to compel events to conform to plans.

Question 5: A company, ‘M’ limited, manufactures mobile phones, both for the domestic Indian market as well as for export. It enjoyed a substantial market share and also had a loyal customer following. But lately, it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also, the mobile market in India has grown tremendously, and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing.
a. Identify the benefits the company will derive from a good control system.
b. How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained?
c. Give the steps in the control process that the company should follow to remove the problems it is facing.

Answer 5: a. The company will derive the following benefits from a good control system:

• i. Deficiencies in the system will be identified, and corrective steps can be taken accordingly. It helps the organisation to move towards the objective in the right way.
• ii. Accuracy of set standards can be determined. If needed, the set of standards can be appropriately modified.
• iii. Optimum resource utilisation will occur, so there will be less wastage of resources and more efficiency.
• iv. The employees will be aware of their roles and expectations from the management, which motivates them to achieve the objective of the organisation.

b. Planning and controlling are closely related functions. While planning is all about what objectives need to be achieved and the steps to follow, controlling is about evaluating the work as per standards and taking necessary corrective actions as required. In the current situation, plans can be made with regard to customer satisfaction, sales and pricing policy. In the event of a lack of standards, there will be no control.

c. The company should follow the steps as mentioned below:

• 1. Standards should be set up which will serve as a benchmark for comparison against actual performance. Standards can be either qualitative or quantitative.
• 2. After setting the standards, actual performance needs to be analysed. It can be done by personal observation and collecting reports of performance.
• 3. The next step would be to compare the performances with standards and find deviations; then, necessary corrective steps can be taken to rectify them.
• 4. Deviations that are over the permissible range should be worked upon. It can be analysed using critical point control and management by exception methods.
• 5. The corrective steps are the last part of controlling as it works towards correcting deficiencies of the organisation.

Question 6: Mr. Shantanu is the Chief Manager of a reputed company that manufactures garments. He called the production manager and instructed him to keep a constant and continuous check on all the activities related to his department so that everything goes as per the set plan. Also, the Chief Manager suggested the production manager to keep track of the performance of all the employees in the organisation so that targets are achieved effectively and efficiently.
a. Describe any two features of controlling highlighted in the above situation. (Goal oriented, continuous and pervasive – any 2).
b. Explain any four points of importance of Controlling.

Answer 6: (a) The features of controlling highlighted in the above case are:

1. Goal oriented: Controlling keeps a close watch on the work in progress and constantly works towards the attainment of organisational goals.
2. Continous process: Controlling is an on-going process as it involves a constant analysis and evaluation of the progress of current tasks and activities as against the set standards.
3. Pervasive process: Controlling is a pervasive function as it can be exercised by all managers irrespective of their level, department or division.

(b) Control is an indispensable function of management without which best of plans can fail.

Importance of Controlling are:

• Promoting coordination: Proper controlling ensures that every department is aware of its respective activities and tasks and coordinates with one another.
• Attainment of organisational goals: Controlling indicates the deviations in performance and takes the required corrective measures. In this way, it helps in the accomplishment of organisational goals in a better manner.
• Evaluating the standards: It helps in assessing and reviewing the accuracy and feasibility of the set standards according to the changing business environment.
• Optimum utilisation of resources: Controlling ensures that each task must be performed according to the set standards, which helps in minimising the wastage of resources.
• Employee motivation: The employees should know well that what is expected from them and the standards against which their performance will be judged. This encourages them to work to the best of their capabilities and achieve the assigned targets.
• Order and discipline: The employees are aware of the fact that they are being continuously observed. Thus, dishonesty and inefficiency in behaviour is minimised.