NCERT Solutions for Class 12 Business Studies Chapter-8

Multiple Choice Questions:

1. An efficient control system helps in 

(a) Accomplishes organisational objectives 

(b) Boosts employee morale 

(c) Judges accuracy of standards 

(d) All of the above 

Ans: All of the aforementioned objectives can be met with the help of an effective controlling system. Controlling is the process of assessing the progress of current tasks and activities and establishing work standards to achieve the organization's goals. An effective control system assists in keeping a close eye on the progress of the work and taking the necessary corrective actions. It aids in tracking changes in the organization and business environment and, as a result, aids in scrutinizing the accuracy of the standards. Controlling also boosts employee morale by informing them ahead of time of what is expected of them and motivating them to work in accordance with the policies in place.

2. Controlling function of an organisation is 

(a) Forward looking 

(b) Backward looking 

(c) Forward as well as backward looking 

(d) None of the above 

Ans: Controlling, as an essential component of management, is both forward and backward looking. It is a backward-looking function in the sense that it evaluates completed work and analyzes deviations from established standards. Based on these deviations, it attempts to implement the necessary corrective actions. As a result, it directs future actions and aims to improve future performance. It is also a forward-thinking function in this sense. As a result, we can say that controlling is both a forward and a backward looking function.

3. Management audit is a technique to keep a check on the performance of 

(a) Company 

(b) Management of the company 

(c) Shareholders 

(d) Customers 

Ans: A management audit is a systematic evaluation of a company's management's overall actions. Its goal is to assess the management's efficiency and effectiveness, as well as to identify areas where it falls short. It reveals performance flaws and aids in the implementation of corrective measures. As a result, a management audit monitors the overall performance of the company's management.

4. Budgetary control requires the preparation of 

(a) Training schedule 

(b) Budgets 

(c) Network diagram 

(d) Responsibility centres 

Ans: Budgetary control is a managerial control technique that entails creating budgets for each operation of the organization and then comparing the actual results to the budgetary standards. A budget is a quantitative statement that defines the goals to be achieved in a given time period as well as the policies to be followed.

5. Which of the following is not applicable to responsibility accounting? 

(a) Investment centre 

(b) Accounting centre 

(c) Profit centre 

(d) Cost centre 

Ans: Accounting center is not a component of accountability accounting. Responsibility accounting is a system in which different divisions of an organization are designated as responsibility centers. Each department is given a target to meet, and the department head (manager) is held accountable for meeting it. There are various types of responsibility centers, including cost centers, investment centers, profit centers, and revenue centers.

Short questions:

1. Explain the meaning of controlling. 

Ans: Controlling is the function of evaluating and assessing the progress of work. It entails establishing specific criteria or standards for the work and then comparing the actual work to the established standards. It aids in identifying deviations from the set targets and, as a result, in taking the necessary corrective actions. It also ensures that everything goes as per the plan. It also ensures that resources are used fully and efficiently. Controlling is an essential managerial function because it keeps a close eye on the progress of work and thus serves as the foundation for future actions and planning.

2. 'Planning is looking ahead and controlling is looking back'. Comment. 

Ans: Planning is forward-thinking, while controlling is backward-thinking. This statement is only partially correct. Planning is a psychological process that involves "thinking and deciding ahead of time" about "what is to be done" and "how it is to be done." It is a mental activity that entails deciding on goals as well as the actions that will be taken to achieve them. Thus, planning is said to be looking ahead because it involves predicting the future. Controlling, on the other hand, entails assessing past performance and comparing it to predetermined standards. Controlling is a backward-looking function in this sense. Both of these statements, however, are only partially correct. Though planning is a forward-thinking concept, it is founded on past actions and experiences. Without looking into the past, it is impossible to plan for the future. Similarly, while controlling involves evaluating past performance, it also aims to improve future performance by implementing necessary corrective actions. As a result, we can say that planning and controlling are both backward and forward looking functions.

3. 'An effort to control everything may end up in controlling nothing'. Explain. 

Ans: The statement, 'an effort to control everything may end up controlling nothing,' refers to the 'Management by Exception' principle. It emphasizes the fact that nothing can be effectively controlled. Rather than controlling every deviation in performance, this principle states that an acceptable range of deviations in various activities should be established, and only deviations that exceed the acceptable range should be brought to the attention of managers for control. In other words, only major deviations that exceed the allowable limit should be acknowledged. Assume, for example, that the acceptable range of increase in input cost is set at 3%. In this case, only an increase of more than 3% in input costs (say, 7%) should be brought to the managers' attention. A decrease of less than 3% (say, 1% ) should, on the other hand, be ignored. As a result, instead of attempting to control everything, an effort should be made to control only the major things.

4. Write a short note on budgetary control as a technique of managerial control. 

Ans: Budgetary control is a control technique that entails creating plans in the form of budgets. A budget is considered as a financial or quantitative statement that defines the goals to be achieved and the policies to be implemented over a specific time period. The actual results are then compared to the budgetary standards. This comparison aids in identifying deviations and, as a result, guides in the implementation of appropriate corrective measures. Budgets can be created for various divisions of an organization, such as sales, production, and purchasing. However, in order for budgeting to be effective, future estimates must be carefully made. Budgeting also serves as a source of motivation for employees by establishing the benchmarks against which their performance will be measured. As a result, it motivates them to meet their goals. Furthermore, it is used to facilitate coordination among the organization's various divisions/departments. Furthermore, proper budgeting ensures that resources are allocated to different divisions based on their needs. As a result, it aids in the most efficient use of resources.

5. Explain how management audit serves as an effective technique of controlling. 

Ans: 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.

Long questions: 

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

Ans: Controlling is a systematic approach to managing and controlling the actions of an organization. The steps involved in the controlling process are as follows.

(i) Establishing Standards: Setting standards entails creating benchmarks against which actual performance will be measured. Standards can be set in both qualitative as well as quantitative terms. Qualitative benchmarks can take the form of improved work coordination, increased goodwill, or increased employee motivation, among other things. For example, to increase employee motivation, a standard can be set in terms of the number of initiatives undertaken. Quantitative benchmarks can take the form of sales targets, units to be produced, or time spent on a specific action, among other things. In a shirt factory, for example, completing 10 pieces per day is a quantitative goal. Creating a performance benchmark Actual performance evaluation When comparing actual performance to standards, Defining and Analyzing Deviation Taking corrective measures The standards that are established should be such that they allow for easy comparison.

(ii) Measuring Real-World Performance: After the standards have been established, the next step is to assess the actual performance of the activities. This can be obtained through a number of methods, including personal observation, sample verification, performance reports, and so on. The checking should be done precisely and reliably so that the correct measurement can be taken for comparison. Measurement can be done both after an activity has been completed and while it is still in progress. For example, before assembling small parts of a larger machine, the parts can be checked. This would allow for continuous monitoring of both the small parts and the final machine.

(iii) Performance Evaluation: Once measured, performance is compared to the established standards. This type of comparison aids in identifying flaws in the work. As a result, it guides managers in taking the necessary steps to improve performance. These comparisons are easier to make when they are in numerical terms. For example, work efficiency in terms of cost incurred can be measured in comparison to the standard cost.

(iv) Deviation Analysis: When comparing actual performance to predetermined standards, every organization encounters deviations. As a result, it is critical to identify the deviations that are within the acceptable range.

It is recommended that deviations in critical areas be addressed first. Managers typically employ 'Critical Point Control' and 'Management by Objectives' to analyze deviations.

Exception' 

1.Critical Point Control: An organization cannot monitor all of the management's activities. As a result, this control technique focuses on only the key result areas (KRAs) that affect the entire organization. For example, an increase in input costs would be more significant than an increase in stationary costs.

2.Management by Exception: This management technique is based on the belief that "trying to control everything results in controlling nothing." Only the essential and significant deviations that exceed the acceptable limit should be controlled, according to this. For example, if there is a 6% increase in labor costs while the allowable limit is only 3%, this should be immediately brought to the attention of management. A 2% increase in cost, on the other hand, can be ignored. Once the deviations are identified, the root cause must be identified. Work deviations can be caused by a variety of factors, including infeasible standards, process flaws, underutilization of resources, changes in the business environment, and so on. As a result, it is critical for management to consider the causes of the aforementioned deviations.

(v) Corrective Actions: When deviations exceed the allowable limits, management is required to take corrective action. This is the final step of controlling, and it aims to correct the organization's flaws so that the errors do not reoccur. For example, if the production target is not met on time, appropriate corrective actions, such as training workers or updating machinery, can be taken.

2. Explain the techniques of managerial control. 

Ans: Traditional Techniques and Modern Techniques are the two broad categories of managerial control techniques.

Techniques of the Past

Traditional techniques are those that have been used by managers for a long time. The following are examples of traditional managerial control techniques.

i. Personal Observation: This technique involves managers personally observing the work being done. It allows the manager to gather the necessary information while also putting pressure on employees to perform well because they are constantly monitored by their boss. It is, however, a time-consuming process that cannot be used where a variety of functions must be overseen.

ii. Statistical Reports: Data from various statistical analyses, such as averages, ratios, percentages, and so on, can be easily presented in the form of graphs, charts, and tables. This type of presentation allows for easy comparison of performance to standards.

iii. Break-Even Analysis: A study of the relationship between costs, volume, and profits. The amount of sales at which there is no profit or loss is referred to as the break-even point. It is calculated when the total cost incurred equals the total revenue earned. The manager can use this technique to estimate the costs and profits to the organization at various levels of quantity and thus find the level where profit can be maximized.

iv. Budgetary Control: Budgetary control is a technique for planning future operations using budgets. In this context, the term "budget" refers to a quantitative or qualitative statement that outlines the goals that must be met within a specific time frame. These budgets are then used as benchmarks for assessing actual performance. It also presents the time-bound policies that will be used to achieve the objectives. It also facilitates exception management by focusing on activities that deviate significantly from budgeted amounts. However, in order for the technique to be effective, future estimates should be as accurate as possible. Furthermore, budgets should be adaptable to changes in the business environment.

Modern Techniques 

As the name implies, modern techniques are new and recent. They are based on managers' new thinking and provide fresh ideas for better managerial control. The following are some of the most recent control techniques.

i. Return on Investment: Return on investment refers to the profits or benefits earned from investments. It is a useful technique for determining whether invested capital is being used effectively and whether reasonable returns are being generated from these investments. Managers can use this technique to compare the performance of different departments or divisions, or to compare current actions to previous year performance.

ii. Ratio Analysis: This technique entails calculating various ratios to analyze financial statements. These ratios are then used to provide effective managerial control. The following are the most commonly used control ratios.

(a) Liquidity Ratio, used to determine a company's short-term solvency.

(b) Solvency Ratio, which is used to determine a company's long-term solvency.

(c) Profitability Ratios, which are used to determine a company's profitability position. 

(d) Turnover Ratios, which are used to determine the efficiency of activities based on resource utilization.

iii. Responsibility Accounting: Different divisions of an organization are designated as responsibility centers under this system. Each center's head is in charge of the center's goals and responsibilities. The following are some examples of responsibility centers that can be established.

(a) The Cost Centre is in charge of the organization's expenses.

(b) Revenue Centre, in charge of revenue generated by sales or marketing activities.

(c) Profit Centre, in charge of profits generated after deducting costs and revenues. 

(d) Investment Center, which takes into account asset investments.

iv. Management Audit: This is a systematic approach to analyzing and evaluating the overall efficiency of a company's management. Its goal is to assess the management's efficiency and effectiveness in order to identify flaws in overall performance. It serves as an important control system by continuously monitoring the managers' work activities.

v. PERT and CPM: The Programme Evaluation and Review Technique (PERT) and the Critical Path Method (CPM) are network-based techniques. It entails breaking down the entire project into various activities and then determining a timeline and cost estimate for each activity and the entire project. Because these techniques deal with time management and resource allocation, they allow for more effective project execution. These techniques are commonly used in shipbuilding, construction projects, and so on.

vi. Management Information System (MIS): An MIS is a computer-based controlling technique that provides managers with timely data and information in order for them to make effective decisions. It processes the organization's massive data and generates useful information for managers. MIS also ensures cost effectiveness in information management by facilitating information collection and dissemination at various levels. Managers can use the aforementioned traditional and modern techniques for effective and efficient organization control.

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

Ans: Controlling is a critical and necessary function of management. Its goal is to manage managerial actions by establishing standards and identifying deviations in actual performance from those standards. It also ensures that resources are used efficiently while corrective actions are taken for deviations. The following are some of the factors that emphasize the significance of control. 

(i) Achieving Organizational Goals: Controlling aims to achieve organizational goals by identifying deficiencies and recommending corrective actions. It aids in moving the organization in the right direction in order to achieve the set organizational objectives.

(ii) Evaluating the Standards: Controlling aids in determining the accuracy of the management's standards. A good control system allows the manager to determine whether the standards set are accurate and feasible. It also assists the organization in reviewing and revising standards in response to the changing business environment. 

(iii) Optimal Resource Utilization: Constant control and monitoring aid in the efficient and optimum utilization of resources. Because each task is completed to the specified standard, there is less waste and spoilage of resources.

(iv) Employee Motivation: When effective control is exercised, employees are made aware of what is expected of them as well as the standards against which their performance will be measured. This encourages them to work harder to meet the goals they've set for themselves.

(v) Order and Discipline: Effective control contributes to the creation of an atmosphere of order and discipline within the organization. Employee dishonesty and inefficiency in behavior are reduced because they are aware that they are being continuously observed.

(vi) Promoting Coordination: Predetermined standards serve as a foundation for improved coordination across various activities. Controlling promotes coordination among departments by making them aware of their responsibilities and tasks. Controlling ensures that the organization's goals are met while providing unity of direction. As a result, controlling is an important function that all managers must perform. Controlling, on the other hand, has some limitations. The following points highlight the issues that the organization encountered when implementing an effective controlling system.

(i) Complication While Setting Standards: For better control, it is critical to establish quantitative as well as qualitative standards. Controlling, on the other hand, becomes less effective when the standards are defined in qualitative terms. The use of qualitative standards complicates the evaluation of performance and the comparison of actual work to the standards. As a result, it may cause a problem during the control process. 

(ii) External Factors: The business environment is constantly changing, and organizations have little control over such external factors. These factors may pose challenges to effective control. Changes in government policies, environmental changes, competition, and so on are examples of such factors.

(iii) Employee Resistance: Controlling can be resisted by employees if it is outside of their comfort zone and freedom. For example, if managers set a specific quantity for production as a standard and the workers find it unrealistic, they can go on strike.

(iv) Expensive Process: Controlling effectively is an expensive endeavor in terms of time, money, and effort. Setting up CCTVs, for example, is very expensive. As a result, it is possible that a small organization will be unable to set up such a system. As a result, managers must ensure that the costs of operating such controlling systems do not outweigh the benefits derived from them.

4. Discuss the relationship between planning and controlling. 

Ans: Management's planning and controlling functions are inextricably linked. On the one hand, planning refers to the psychological process of considering and deciding what should be done and how it should be done. That is, planning determines the goals to be achieved and the course of action to be taken. Controlling, on the other hand, refers to the process of managing and evaluating work done in accordance with standards and implementing corrective measures if there are any deficiencies. Planning establishes the standards that serve as the foundation for controlling. The various objectives and policies developed during planning serve as benchmarks against which actual performance is measured. Controlling without planning is a waste of time. There is nothing to control if there are no standards or objectives. That is, if managers do not know what the end goal is, they have no standard against which to judge current performance and deficiencies. Similarly, planning without control is meaningless. Following the formulation of the plans, it is necessary to monitor and evaluate whether the performance is in accordance with the desired plans. Controlling is required for determining whether the plan is being properly implemented, if there are any deficiencies in the work, and if corrective actions are required to achieve the planned goals. Planning cannot be carried out if there is no control. As a result, planning without control is useless. As a result, both planning and controlling can be said to complement one another. Both the concepts of planning as well as controlling are in some ways intertwined because they are both forward and backward looking. Though it is commonly stated that planning is forward-looking and controlling is backward-looking, this is only partially true. Though planning is a forward-thinking concept that deals with making plans and establishing the standards in advance. It is also based on past experiences as well as actions which have been initiated in the controlling function. Thus, planning, in addition to being forward-looking, is also backward-looking. Similarly, while controlling is based on past actions and deals with comparing current actions to predefined standards, it also focuses on taking corrective actions to improve management's future performance. Thus, controlling, in addition to looking back, also looks forward. As a result, while planning is a prerequisite for controlling, controlling is incomplete without planning. Both are inseparable functions that contribute to the achievement of the organization's goals.

Application Type 

Following are some behaviours that you and others might engage in on the job. For each item, choose the behaviour that management must keep a check to ensure an efficient control system. 

1. Biased performance appraisals 

2. Using company’s supplies for personal use 

3. Asking a person to violate company’s rules 

4. Calling office to take a day off when one is sick 

5. Overlooking boss’s error to prove loyalty 

6. Claiming credit for someone else’s work 

7. Reporting a violation on noticing it 

8. Falsifying quality reports 

9. Taking longer than necessary to do the job 

10. Setting standards in consultation with workers You are also required to suggest to the management how the undesirable behaviour can be controlled. 

Ans: 

1. To avoid biased appraisals, performance evaluations should be conducted by an expert committee.

2. Because the statements are not expensive, they can be ignored.

3. Immediate and severe disciplinary action should be taken.

4. Mass bunking should be prohibited.

5. A secret suggestion box can be used to gather feedback on the boss for appraisal purposes.

6. Employee performance records must be kept.

7. If it is minor, it can be overlooked.

8. Strict quality control procedures should be followed.

9. A time and motion study will be conducted in order to establish standards.

10. The application of scientific techniques can aid in the establishment of the most feasible and optimal standards.

Case Problem 

A company ‘M’ limited is manufacturing mobile phones both for the domestic Indian market as well as for export. It had 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. 

1. Identify the benefits the company will derive from a good control system. 

Ans: 

1. Achieving desired outcomes

2. Operational precision.

3. Resource utilization that is efficient and effective.

4. Boosting employee morale.

5. Ensuring the proper flow of orders and the overall system's discipline.

6. Improves individual performance through coordination.

2. 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. 

Ans: 

(i) Establishing Standards Setting standards entails creating benchmarks against which actual performance will be measured. If we talk about the standards, they can be set in both qualitative as well as quantitative terms. Creating a performance benchmark Actual performance evaluation When comparing actual performance to standards, Defining and Analyzing Deviation Term for taking corrective action Qualitative benchmarks can take the form of improved work coordination, increased goodwill, or increased employee motivation, among other things.

(ii) Measuring Real-World Performance After the standards have been established, the next step is to assess the actual performance of the activities. This can be gained  through a lot of methods such as personal observation, sample verification, performance reports, and so on. The checking should be done precisely and reliably so that the correct measurement can be taken for comparison. Measurement can be done both after an activity has been completed and while it is still in progress.

(iii) Performance Evaluation Once measured, performance is compared to the established standards. This type of comparison aids in identifying flaws in the work. As a result, it guides managers in taking the necessary steps to improve performance. These comparisons are easier to make when they are in numerical terms. 

(iv) Deviation Analysis When comparing actual performance to predetermined standards, every organization encounters deviations. As a result, it is critical to identify the deviations that are within the acceptable range. It is recommended that deviations in critical areas be addressed first. Managers typically employ 'Critical Point Control' and 'Management by Exception' to analyze deviations. Once the deviations have been identified, the source of the deviations must be identified. Work deviations can be caused by a variety of factors, including infeasible standards, process flaws, underutilization of resources, changes in the business environment, and so on. As a result, it is critical for management to consider the causes of the aforementioned deviations.

(v) Corrective Actions When deviations exceed the allowable limits, management is required to take corrective action. This is the final step of controlling, and it aims to correct the organization's flaws so that the errors do not reoccur. For example, if the production target is not met on time, appropriate corrective actions, such as training workers or updating machinery, can be taken.

3. Give the steps in the control process that the company should follow to remove the problems it is facing. 

Ans: 

1. Establishing performance standards

2. Evaluation of actual performance.

3. Assessment of actual performance in relation to standards.

4. Deviation analysis

5. Implementing corrective measures.

4. What techniques of control can the company use? In all the answers keep in mind the sector of business the company is in. 

Ans: 

i. Return on Investment: The gains or benefits earned in relation to the investments made are referred to as return on investment. It is a useful technique for determining whether invested capital is being used effectively and whether reasonable returns are being generated from these investments. Managers can use this technique to compare the performance of different departments or divisions, or to compare current actions to previous year performance.

ii. Responsibility Accounting: Different divisions of an organization are designated as responsibility centers under this system. Each center's head is in charge of the center's goals and responsibilities. The following are some examples of responsibility centers that can be established.

(a) The Cost Centre is in charge of the organization's expenses.

(b) Revenue Centre, in charge of revenue generated by sales or marketing activities.

(c) Profit Centre, in charge of profits generated after deducting costs and revenues. W

(d) Investment Center, which takes into account asset investments.

iii. Management Information System: MIS is a computer-based controlling technique that provides managers with timely data and information in order for them to make effective decisions. It processes the organization's massive data and generates useful information for managers. MIS also ensures cost effectiveness in information management by facilitating information collection and dissemination at various levels.

NCERT Solutions Class 12 Business Studies Chapter 8 - Free PDF Download

Downloading the NCERT Solutions for Class 12 Business Studies Chapter 8 Controlling Class 12 Business Studies from the website and app is a free and easy process. It is one of the prime objectives of mastering this chapter. The critical analysis of the chapter provides a strong foundation of knowledge. This NCERT Solutions Class 12 Business Studies Chapter 8 covers all the student’s doubts about mastering the concepts of acquiring managerial skills and the relationship between controlling and planning. These topics are specifically curated by our subject experts. Exam preparation has never been easier. The study material is guaranteed to enhance your rank in your exams.

NCERT Solutions for Class 12 Business Studies Chapters

Chapter 8 - Controlling

CBSE Business Studies Class 12 Chapter 8 - Controlling is part of the NCERT Business Studies textbook for Class 12 and a primary resource for this topic. NCERT Solutions Class 12th Business Studies Chapter 8 displays structured descriptions highlighted as visual cues to provide a strong grasp of the chapter. The chapter describes the relationship between planning and controlling with emphasis on their factors. It portrays a clear analysis of the managerial skills employed using statistical methodologies. 

Our subject matter experts provide the reader with an abundance of information to strengthen the foundation of the subject. The in-depth analysis of the business skills needed in a practical work environment is portrayed strongly in the chapter.

Class 12 Business Studies Chapter Wise Marks Weightage

This Class 12th Business Studies Chapter 8 has a weightage of 20 marks and is an important topic covered in exams. Basic questions keep repeating in the Board exams from this subject, for which preparing from this study material makes students score better. 

Here is more detail about the contents of Chapter 8 Controlling Class 12.

Why are NCERT Solutions for Class 12 Business Studies Chapter 8 Important?

• Class 12 Economics Chapter 8  Controlling NCERT Solutions are prepared by a team of experts who make learning fun.

• NCERT Business Studies Class 12 Chapter 8 comes with important terminology, visual cues about the topic, and examples that can be used for simplified revision before exams.

• Our brief answers provide a solid foundation of the topic which helps in smooth preparation for exams. 

• These solutions are composed of key information, graphs, tables, and discussion on specific topics.

• For better understanding, the material provides a systematic overview of all the important points.