We have completed the NCERT/CBSE Solutions chapter-wise for Class 12 Business Studies Chapter 8 Controlling with Answers by expert subject teacher for latest syllabus and examination. Prepare effectively for the exam taking the help of the Class 12 Business Studies NCERT Solutions PDF free of cost from here. Students also can take a free NCERT Solutions of Controlling. Each question has right answer Solved by Expert Teacher. Download the Business Studies NCERT Solutions with Answers for Class 12 Business Studies Pdf and prepare to help students understand the concept very well.
NCERT Solutions for Class 12 Business Studies Chapter wise
Exercises
Very Short Answer Type :
Q1. Explain the meaning of controlling.
Answer:Controlling is the process of comparing the actual performance with the standards and taking corrective action, if required. It finds out deviations from the pre-determined standards, so it is called a backward looking function and provides standards to control without which controlling becomes aimless or baseless.
Q2. 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: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 e.g. job satisfaction will be different for different employees.
Q3. State any one situation in which an organisation’s control system loses is effectiveness.
Answer: A control system is bound to lose its effectiveness whenever the standards cannot be defined in quantitative terms thereby making it difficult to measure deviations happening between actual and standard performance. For example, job satisfaction cannot be described in quantitative terms as it is different for different employees.
Q4. Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.
Answer: Standards that are used by a company for evaluating performance of Finance and Accounting department are:
- Liquidity
- Flow of Capital
Q5. Which term is used to indicate the difference between standard performance and actual performance?
Answer: Deviation is the term that is used to indicate the difference between standard and actual performance.
Short Answer Type :
Q1. ‘Planning is looking ahead and controlling is looking back’. Comment.
Answer: Planning is done always for the future. It is a well thought outline of the future events. According to George Terry, “Planning is oriented to and requires a feeling for the future. It is an investment of thought and time in the present for reaping the benefits in future. Some people believe’ that planning is unearthing the things for a better future.” It is called looking ahead because a well thought procedure is following in the future.
According to Allen, “Plan is a trap which is laid down to catch the future.” Thus it is clear that planning involves making estimates for the future, the more correct the estimates the more successful would.be the PlAnswer:Thus it is true that planing is looking in to the future.
It contrast to planning, control is called a looking back because a manager makes a comparison with the laid down standards Only after certain activity has been performed is compared with the- predetermined standards. Since both these activities have been already performed hence to compare them is in fact looking back. Looking back means, evaluating the work or performance which has already been done.
Q2. ‘An effort to control everything may end up in controlling nothing’. Explain.
Answer: 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.
Q3. Write a short note on budgetary control as a technique of managerial control.
Answer: Budgetary control is the application of preparing budgets for each activity and operation of the organization. It refers to the goals and objectives of an organization achieved in quantitative terms. The actual results are compared with the planned budgets. The work is assessed and deviations are noted. These are correlated and action plans are developed. The resource requirement of various departments is analyzed and met according to the standards set up by the organization. Therefore, it is used to streamline managerial control.
Q4. Explain how management audit serves as an effective technique of controlling.
Answer:Management audit is the process of appraisal of the management in an organisation. It is useful in improving the effectiveness of the management and also increases efficiency. It evaluates the functions of the managers and highlights areas where deficiencies are observed. The following point will be helpful in explaining the importance of management audit as a technique of controlling:
- It helps in identifying deficiencies in the work which will help in taking corrective measures necessary for the improvement.
- By performing management audit, various management activities can be monitored which helps in improving overall efficiency of the organisation.
- Enhanced coordination can be observed between employees and departments as work is monitored for effectiveness.
- Helps organisation to adapt environmental changes and this can be ensured by having strategies and policies updated continuously.
Q5. 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 Mr. Bhanu Prasad and requested her to terminate his services. Explain the principle of management control that MsVasundhara should consider while taking her decision.
Answer: In this situation the principle of management by exception should be followed. This principle states that any effort to control everything may end up having control of nothing. Only deviations that are beyond the limit will need to be acknowledged and appropriate actions need to be taken. Therefore Mr. Bhanu should not be terminated for such a small reason.
long Answer Type :
Q1. Explain the various steps involved in the process of control.
Answer: Steps in the controlling process are:
a. Comparing performance against standards: The next step is to compare the actual performance with the standards. If both are parallel to each other than the controlling process ends there only. But if there are any deviations then the manager tries to find out the reasons for the same. Deviations of minor nature can be ignored but if the deviations are major then timely action must be taken.
b. Analysing deviations: Only the deviations which have a significant impact on the organisation should be brought to the notice of the top management. Deviations must be divided in two categories; deviations which need to be attended urgently and the minor deviations. These two deviations must be controlled in the following way:
c. Critical point control: It means focusing on the key areas and in case of any deviation in these areas then it should be attended urgently.
d. Management by exception: A manager who tries controlling everything may end up controlling nothing. Therefore the deviations which are beyond the specific range should be handled by him and the minor deviations should be attended to by the lower or the middle level management.
e. Taking corrective measures: After comparing the actual performance with the standards and finding out the deviations, the manger is required to know the reasons for the deviations and taking corrective actions to remove the occurrence of such deviations in future.
Q2. Explain the techniques of managerial control.
Answer: 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.
Q3. Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?
Answer: Following are the importance of controlling in an organisation:
- Controlling helps in achieving of organisational goals by optimum use of resources and correcting deficiencies in the process.
- It helps in determining the accuracy of the standards set by management. It also helps in reviewing the standards as per changing business requirement.
- It also helps an employee to become motivated as they know what the management expects from them.
- It also enables effective decision making in the organisation by promoting order and discipline.
- 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:
- The set of standards cannot be set for both qualitative and quantitative terms as qualitative terms make controlling less effective.
- Changing factors in business environment results is changing of control mechanisms in an organisation.
- Controlling will be resisted if it is against the comfort level of employees.
- Controlling is a costly affair as infrastructure needs to be setup.
Q4. Discuss the relationship between planning and controlling.
Answer: Relationship between planning and controlling:
There is a deep relationship between planning and controlling. Planning is meaningless without controlling and controlling is useless without planning.
Planning can be successful only if there is proper controlling. If the process of controlling is not followed then no worker will take the plans seriously and so the plans will fail. Therefore if the process of controlling is not present then it is meaningless to have planning.
Controlling is useless without planning. Under the process of controlling actual performance is compared with the standards, and the standards are determined with the help of planning. In the absence of planning, no comparison can be made and so controlling will fail.
Application Type Questions
Q1. 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.
- Biased performance appraisals
- Using company’s supplies for personal use
- Asking a person to violate company’s rules
- Calling office to take a day off when one is sick
- Overlooking boss’s error to prove loyalty
- Claiming credit for someone else’s work
- Reporting a violation on noticing it
- Falsifying quality reports
Q5. A company ‘M’ limited is manufacturing mobile phones both for 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 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: (a) The following benefits will be derived:
i. Deficiencies in system will be identified and corrective steps can be taken accordingly. It helps organisation to move towards the objective in a right way.
ii. Accuracy of set standards can be determined. If needed 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 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 lack of standards there will be no control.
(c) Following steps can be followed in controlling:
- Standards should be setup which will serve as benchmark for comparison against actual performance. Standards can be either qualitative or quantitative.
- After setting of the standards, actual performance needs to be analysed. It can be done by personal observation and collecting reports of performance.
- The next step would be to compare the performances with standard and find deviations, then neccesary corrective steps can be taken to rectify them.
Q6. Mr. Shantanu is a 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. He also suggested him to keep a 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: (a)Following features of controlling are highlighted here
i. By keeping a close watch in progress of work and constantly engaging in work towards attaining goals of organisation. It is goal oriented approach.
ii. Controlling is a pervasive function which can be exercised by managers of any level, division or department.
(b) Following are the points of controlling
- Controlling helps in achieving of organisational goals by optimum use of resources and correcting deficiencies in the process.
- It helps in determining the accuracy of the standards set by management. It also helps in reviewing the standards as per changing business requirement.
- It also helps an employee to become motivated as they know what the management expects from them.
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