CBSE Class 12 Business Studies Sample Paper 2026 27 with Solutions PDF Download

Business Studies (Subject Code 054)
CLASS XII (2026-27)
SAMPLE QUESTION PAPER
TIME ALLOWED: 3 hours
M.M: 80

General instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 marks may be about 150 words.
6. Answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the questions together.

Question 1. Ms Pratima Bhanot is working as Quality Control Supervisor in a company. Identify the function that she will not be performing at the level at which she is working: [1 Mark]
(A) Ensuring the quality of output of workers.
(B) Confirming that safety standards are maintained in the organisation.
(C) Analysing the business environment and its implications for the survival of the firm.
(D) Minimising the wastage of materials.

Answer 1. (C) Analysing the business environment and its implications for the survival of the firm.

Question 2. Name the technique of Scientific Management that relates the compensation system to the efficiency of workers. [1 Mark]
A) Motion Study
B) Differential Piece Wage System
C) Standardisation and Simplification of work
D) Fatigue Study

Answer 2. B) Differential Piece Wage System

Question 3. Raja is the Managing Director of Shraddha Ltd., a firm manufacturing Environment Friendly products. As the firm grows in size he has decided to pay attention to the organisation structure. Which of the following organization structures should he choose in order to make managerial development easier, by providing autonomy and the chance to perform multiple functions? [1 Mark]
A) Functional Structure
B) Span of management
C) Divisional Structure
D) Informal organisation

Answer 3. C) Divisional Structure

Question 4. Read the following statements very carefully:
Statement I: Trade tests evaluate the potential of a candidate for acquiring new skills.
Statement II: Training prepares employees to take charge of higher positions in case of an emergency.
Choose the correct option from the following: [1 Mark]
(A) Statement I is true and Statement II is false.
(B) Statement II is true and Statement I is false.
(C) Both the statements are true.
(D) Both the Statements are false.

Answer 4. (B) Statement II is true and Statement I is false.

Question 5. 'Dash n Dip' was established in 2022 as one of the first fast-food chains in India introducing the concept of family-style restaurants. However, within two years, the business started losing customers to multinational food chains and eventually had to shut down its operations. The owner of the restaurant, Ms Kamya Kulkarni realized that she had been unable to identify, understand, evaluate and respond to the external environmental trends like changes in customer's preferences and increasing competition. This had resulted in hindering the firm's performance. Identify the importance of understanding the business environment highlighted in the above case. [1 Mark]
(A) It helps in tapping useful resources.
(B) It helps the firm to identify threats and early warning signals.
(C) It helps in assisting in planning and policy formulation.
(D) It enables the firm to identify opportunities and get the first mover advantage.

Answer 5. (B) It helps the firm to identify threats and early warning signals.

Question 6. Choose the correct statement about controlling function of management: [1 Mark]
(A) Controlling completes one cycle of management process and improves planning in the next cycle.
(B) Controlling is the function of management that initiates action by people in the organisation.
(C) Controlling involves only looking back and not looking ahead.
(D) Standards in the Controlling process must be set in quantitative terms only.

Answer 6. (A) Controlling completes one cycle of management process and improves planning in the next cycle.

Question 7. Match the terms given in column 1 with their meaning given in column 2: [1 Mark]
Column 1:
1. Financial Intermediation
2. Primary market
3. Capital market
4. Financial market
Column 2:
(i) Facilities and institutional arrangements through which long term funds both equity and debt are raised and invested
(ii) The process by which allocation of funds is done
(iii) Market for creation and exchange of financial assets
(iv) Securities are sold by the company to the investor directly (or through an intermediary).
Choose the correct option:
(A) 1 (i), 2 (ii), 3 (iii), 4 (iv)
(B) 1 (ii), 2 (iv), 3 (i), 4 (iii)
(C) 1 (ii), 2 (iii), 3 (i), 4 (iv)
(D) 1 (iv), 2 (ii), 3 (i), 4 (iii)

Answer 7. (B) 1 (ii), 2 (iv), 3 (i), 4 (iii)

Question 8. Who is a consumer under the Consumer Protection Act, 2019? [1 Mark]
(A) It includes any user of such goods or beneficiary of services if such use is made with the disapproval of the buyer.
(B) It applies to online transactions only which are made through electronic means or by teleshopping or direct selling or multilevel marketing.
(C) Any person who obtains goods or avails services for resale or commercial purpose.
(D) A person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment.

Answer 8. (D) A person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment.

Question 9. Choose the incorrect statement about the principle of management illustrated by the concept of Teamwork: [1 Mark]
(A) Absence of this principle will result in loss of coordination.
(B) The principle should be promoted in all organisations otherwise objectives would be difficult to realise.
(C) The principle helps avoid dual subordination.
(D) The principle promotes a spirit of unity and harmony among employees.

Answer 9. (C) The principle helps avoid dual subordination.

Question 10. Assertion (A): Capital budgeting decisions have a long-term impact on the profitability and growth of a business.
Reason (R): Capital budgeting decisions deal only with short-term revenue expenditures.
Choose the correct options: [1 Mark]
(A) Both A and R are true and R is the correct explanation of A.
(B) Both A and R are true but R is not the correct explanation of A.
(C) A is true but R is false.
(D) A is false but R is true.

Answer 10. (C) A is true but R is false.

Question 11. The Consumers Affairs Minister met with the representatives from various E-Commerce firms on the subject of "dark patterns", warning them that app designs that are intended to deceive and nudge users to spend more or compromise their privacy are considered unfair trade practices. Which authority under the Consumer Protection Act, 2019 would regulate matters relating to violation of rights of consumers, unfair trade practices and take necessary action? [1 Mark]
A) Central Consumer Protection Authority
B) Non-Governmental Organisations
C) Supreme Court
D) Consumer affairs Ministry

Answer 11. A) Central Consumer Protection Authority

Question 12. Select the statement that does not correctly describe working capital. [1 Mark]
(A) It consists of funds invested in current assets of the business.
(B) It helps in carrying out regular business activities smoothly.
(C) It is calculated as the difference between current assets and current liabilities.
(D) It is usually less liquid but contributes more to the profits than fixed assets.

Answer 12. (D) It is usually less liquid but contributes more to the profits than fixed assets.

Question 13. A ₹2 lakh fine has been imposed on an online pharmacy Medisimple for automatically renewing a three-month membership subscription of the customers for ₹99 without obtaining explicit user consent. The order passed by the Concerned Authority stated that the promotion design used by the pharmacy amounted to an unfair trade practice called "basket sneaking", and directed the company to refund consumers who had not consented to the renewal. Where can the appeal be filed in case any of the parties is not satisfied with the order, on the grounds of facts or rules of Consumer Protection Act, 2019? [1 Mark]
A) District Commission
B) State Commission
C) National Commission
D) Supreme Court

Answer 13. B) State Commission

Question 14. Arijit and Ananya started a small business selling Eco-Friendly home decoration items made from recycled materials under the name 'EcoComfort'. Ananya carefully analysed market conditions and predicted that there will be an increasing awareness about sustainability among urban consumers and the competition from conventional home decor brands will be moderate. They decided to achieve ₹2 lakh monthly sales by the end of first year. Arijit explored the following innovative courses of action to achieve the target:
1. Selling through online platforms like E-Commerce marketplaces and social media stores.
2. Including local retail outlets to reach the local target market.
3. Partnering with cafes, gyms, wellness stores for product placements.
Identify the steps which have not been performed by Arijit and Ananya in carrying out the planning function of management.
(i) Setting objectives
(ii) Follow up action
(iii) Implementing the plan
(iv) Developing premises
(v) Identifying alternative courses of action
(vi) Selecting an alternative
(vii) Evaluating alternative courses
Choose the correct option: [1 Mark]
(A) (i), (iv), (v)
(B) (ii), (iii), (iv), (vi)
(C) (i), (iv), (v), (vii)
(D) (vii), (vi), (iii), (ii)

Answer 14. (D) (vii), (vi), (iii), (ii)

Question 15. Astrio Ltd. is a fast-growing company engaged in manufacturing consumer goods. The management noticed that despite good demand for its products, the company often faced delays in certain activities, while at other times money remained unused for long periods. To address this issue, the finance department decided to prepare a comprehensive plan before undertaking future activities. The company carefully assessed its upcoming business requirements and tried to determine how much money would be needed for different activities and at what stage these requirements would arise. At the same time, the management examined various ways through which funds could be arranged so that financial requirements could be met without disruption. Identify the concept discussed in the above lines. [1 Mark]
(A) Capital structure
(B) Financial control
(C) Investment
(D) Financial planning

Answer 15. (D) Financial planning

Question 16. Raahat has started a diagnostic centre in Gurgaon and decided to offer a salary of ₹10,000 plus a commission of ₹200 for each sample collected, to the employees appointed for the purpose. Name the cost being discussed above. [1 Mark]
A) Fixed cost
B) Variable cost
C) Semi Variable cost
D) Total cost

Answer 16. C) Semi Variable cost

Question 17. Delicious Beverages Ltd. is a company manufacturing packaged fruit juices. Initially, the company enjoyed a monopoly in the local market, and customers readily bought its products. However, in recent years, several new beverage companies have entered the market. To retain customers, Delicious Beverages Ltd. started offering attractive credit terms, discounts, and promotional schemes. The company also increased its inventory to ensure uninterrupted supply. Identify the factor affecting the working capital requirement of Delicious Beverages Ltd. being discussed above: [1 Mark]
A) Growth prospects
B) Level of competition
C) Production Cycle
D) Scale of operations

Answer 17. B) Level of competition

Question 18. Rama purchased a breakfast cereal "Healthme", which her friend Sapna had recommended. Sapna told her that consuming the cereal for breakfast had helped her in losing 5 kgs in 6 months. Rama had also seen the advertisement for the cereal which suggested weight loss and fitness. Rama did not lose any weight even after one year. She approached the helpline of the company to file a complaint. The employee on the helpline asked her to read the general instructions on the package, which said that the "results may vary". Rama realised that she had not read the information written on the tag attached to the product before buying it. Which consumer right did Rama exercise and which consumer responsibility had she ignored? [1 Mark]
A) Right to be heard, Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.
B) Right to be assured, Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.
C) Right to be assured, Buy only standardised goods as they provide quality assurance.
D) Right to be heard, File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed.

Answer 18. A) Right to be heard, Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

Question 19. A company has an existing equity share capital of ₹20,00,000. It proposes to raise an additional ₹10,00,000 either by issuing equity shares or by issuing 10% debentures. If the Earnings Before Interest and Tax (EBIT) of the company is ₹4,50,000 and the corporate tax rate is 30%, which of the following financing options will result in a higher Earnings Per Share (EPS)? [1 Mark]
(A) Issue of equity shares
(B) Issue of debentures
(C) Both financing options will result in the same EPS
(D) EPS cannot be determined with the given information

Answer 19. (B) Issue of debentures

Question 20. The management of Pure Foods Pvt. Ltd. noticed that in spite of timely salaries and satisfactory working conditions, employees seemed disengaged and less committed to their work. The management conducted regular performance reviews and introduced a system where supervisors monitored work progress closely. Thus, the employees knew well in advance the standards of performance on the basis of which they will be appraised. Feedback was provided regularly, and employees who performed well were appreciated publicly during monthly meetings. Underperforming employees were given guidance and training instead of punishment. After a few months, employee confidence improved, and performance levels increased significantly. Identify the point of importance of controlling function discussed in the above case. [1 Mark]
A) Judging accuracy of standards
B) Improving employee motivation
C) Ensuring order and discipline
D) Both A and B

Answer 20. B) Improving employee motivation

Question 21. (A) State the first three steps involved in selecting the most suitable candidate for a job. [3 Marks]
OR
(B) State any three benefits of training and development to the organisation. [3 Marks]

Answer 21.
(A)
(i) Preliminary Screening: Preliminary screening helps the manager eliminate unqualified or unfit job seekers based on the information supplied in the application forms. Preliminary interviews help reject misfits for reasons, which did not appear in the application forms.
(ii) Selection Tests: An employment test is a mechanism (either a paper and pencil test or an exercise that attempts to measure certain characteristics of individuals. These characteristics range from aptitudes, such as manual dexterity, to intelligence to personality.
(iii) Employment Interview: Interview is a formal, in-depth conversation conducted to evaluate the applicant's suitability for the job. The role of the interviewer is to seek information and that of the interviewee is to provide the same. Though, in present times, the interviewee also seeks information from the interviewer.
*(One mark for each statement)*
OR (B)
Benefits of training and development to the organisation: (any 3)
(i) Training is a systematic learning, always better than hit and trial methods which lead to wastage of efforts and money.
(ii) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
(iii) Training equips the future manager who can take over in case of emergency.
(iv) Training increases employee morale and reduces absenteeism and employee turnover.
(v) It helps in obtaining an effective response to a fast changing environment - technological and economic.

Question 22. After completing a diploma in sales and marketing, Supreet joined as a telesales representative in a French Insurance Company in Paris. Although he was fluent in English language and a friendly, knowledgeable person, he was unable to meet the sales target. Mr. Pierre, his supervisor, called a meeting to discuss the reason for his under performance. Mr. Pierre came to know that Supreet had only done a basic course in French language and therefore, due to lack of proficiency in the French language he made mistakes while communicating with French clients.
a) Name the barrier of communication due to which Supreet was unable to meet the target.
b) Apart from the barrier identified in part a) briefly explain any two barriers of communication from the same group. [3 Marks]

Answer 22.
a) The barrier of communication due to which Supreet was unable to meet the target is Faulty Translation.
b) The barriers under the group Semantic Barriers are: (any two)
(i) Badly expressed message: Sometimes intended meaning may not be conveyed by a manager to his subordinates. These badly expressed messages may be an account of inadequate vocabulary, usage of wrong words, omission of needed words, etc.
(ii) Symbols with different meanings: A word may have several meanings. The receiver has to perceive one such meaning for the word used by the communicator. Wrong perception leads to communication problems.
(iii) Unclarified assumptions: Some communications may have certain assumptions which are subject to different interpretations.
(iv) Technical jargon: It is usually found that specialists use technical jargon while explaining to persons who are not specialists in the concerned field. Therefore, they may not understand the actual meaning of many such words.
(v) Body language and gesture decoding: Every movement of the body communicates some meaning. The body movement and gestures of the communicator matters so much in conveying the message. If there is no match between what is said and what is expressed in body movements, communications may be wrongly perceived.

Question 23. (A) Explain the following factors affecting financing decision of a company:
(a) Control considerations
(b) State of capital market
OR
(B) Explain the following factors affecting the fixed capital requirements of a company:
(a) Choice of technique
(b) Growth prospects [3 Marks]

Answer 23.
(A)
(a) Control considerations—Issue of more equity may lead to dilution of management's control over the business. Debt financing has no such implication. Companies afraid of a takeover bid would prefer debt to equity.
(b) State of capital market—Health of the capital market may also affect the choice of source of fund. During the period when the stock market is rising, more people invest in equity. However, a depressed capital market may make the issue of equity shares difficult for any company.
OR (B)
(a) Choice of technique—Some organisations are capital intensive whereas others are labour intensive. A capital-intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organisations would be higher. Labour intensive organisations on the other hand require less investment in fixed assets. Hence, their fixed capital requirement is lower.
(b) Growth prospects—Higher growth of an organisation generally requires higher investment in fixed assets. Even when such growth is expected, a company may choose to create higher capacity in order to meet the anticipated higher demand quicker. This entails larger investment in fixed assets and consequently larger fixed capital.

Question 24. Mr Bhavik Bhavnani was recently appointed as the Human Resource Manager of 'Sorbit Informations'. Till now, the company had been advertising all its vacancies in a local newspaper publication called 'Climb Heights'. However, many times, it would bring a flood of responses from unsuitable candidates. The General Manager, Mr Raman Kalia, called Mr Bhavnani for a meeting to take his suggestions about alternative ways of searching for prospective employees. Mr Bhavnani suggested that the company should maintain a close liaison with leading management institutes of the country. He also advised hiring private agencies and professional bodies who would recommend suitable candidates to the company. Also, as a database of unsolicited applicants was kept in the organisation, it was discussed that a list of such job-seekers could be prepared and screened to fill the vacancies. State the various sources suggested by Mr Bhavnani in the above case study, by which potential candidates may be located and stimulated to apply for jobs in the organisation. [3 Marks]

Answer 24.
1) Campus Recruitment: Colleges and institutes of management and technology have become a popular source of recruitment for technical, professional and managerial jobs. Many big organisations maintain a close liaison with the universities, vocational schools and management institutes to recruit qualified personnel for various jobs.
2) Placement Agencies and Management Consultants: In technical and professional areas, private agencies and professional bodies appear to be doing substantive work. Placement agencies provide a nationwide service in matching personnel demand and supply. These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients. Such agencies charge a fee for their services. Management consultancy firms help the organisations to recruit technical, professional and managerial personnel. They specialise in middle level and top level executive placements.
3) Casual Callers: Many reputed business organisations keep a database of unsolicited applicants in their offices. Such job-seekers can be a valuable source of manpower. A list of such job-seekers can be prepared and can be screened to fill the vacancies as they arise.

Question 25. (A) Explain the following points of nature of Principles of Management:
a) Cause and effect relationship
b) Universal applicability
OR
(B) Explain the following Principles of Management:
a) Harmony not discord
b) Science not rule of thumb [4 Marks]

Answer 25.
(A)
a) Cause and effect relationship—The principles of management are intended to establish a relationship between cause and effect so that they can be used in similar situations in a large number of cases. As such, they tell us if a particular principle was applied in a particular situation, what would be its likely effect. The principles of management are less than perfect since they mainly apply to human behaviour. In real life, situations are not identical. So, accurate cause and effect relationships may be difficult to establish.
b) Universal applicability—The principles of management are intended to apply to all types of organisations, business as well as non-business, small as well large, public sector as well as private sector, manufacturing as well as the services sectors. However, the extent of their applicability would vary with the nature of the organisation, business activity, scale of operations and the like.
OR (B)
a) Harmony not discord—Taylor called for complete mental revolution on the part of both management and workers. It means that management and workers should transform their thinking. In such a situation even trade unions will not think of going on strike etc. Management should share the gains of the company, if any, with the workers. At the same time workers should work hard and be willing to embrace change for the good of the company. Both should be part of the family. According to Taylor, 'Scientific management has for its foundation the firm conviction that the true interests of the two are one and the same'.
b) Science not rule of thumb—Taylor pioneered the introduction of the method of scientific inquiry into the domain of management practice. Taylor believed that there was only one best method to maximise efficiency. This method can be developed through study and analysis. The method so developed should substitute 'Rule of Thumb' throughout the organisation. Scientific method involved investigation of traditional methods through work-study, unifying the best practices and developing a standard method, which would be followed throughout the organisation.

Question 26. "Important decision areas in this respect include selection of dealers or intermediaries to reach the customers, providing support to the intermediaries (by way of discounts, promotional campaigns, etc.)." Explain any two components of the element of marketing mix discussed above. [4 Marks]

Answer 26.
Components of physical distribution - the element of marketing mix discussed (Any two):
1. Transportation: Transportation is the means of carrying goods and raw materials from the point of production to the point of sale. It is one of the major elements in the physical distribution of goods. It is important because unless the goods are physically made available, the sale cannot be completed.
2. Warehousing: Warehousing refers to the act of storing and assorting products in order to create time utility in them. The basic purpose of warehousing activities is to arrange placement of goods and provide facilities to store them. The need for warehousing arises because there may be a difference between the time a product is produced and the time it is required for consumption.
3. Inventory control: Linked to warehousing decisions are the inventory decisions which hold key to success for many manufacturers, especially those where the per unit cost is high. A very important decision in respect of inventory is deciding about the level of inventory. Higher will be the level of service to customers but the cost of carrying the inventory will also be high because a lot of capital would be tied up in the stock. Thus, a balance is to be maintained in respect of the cost and customer satisfaction.
4. Order processing: In a typical buyer-seller relationship, order placement is the first step. Products flow from manufacturers to customers via channel members while orders flow in the reverse direction, from customers to the manufacturers. A good physical distribution system should provide for an accurate and speedy processing of orders, in the absence of which, goods would reach the customers late or in wrong quantity or specifications. This would result in customer dissatisfaction, with the danger of loss of business and goodwill.

Question 27. HK Metals Limited has set clear standards for production output, defect rate and operating costs. During a monthly review, Mr Himank, the Chairman, received a report from the Accounts Manager, Mr Akhil. He reported that most expenses were within the approved budget. However, the maintenance expenses had exceeded the permissible limit set by management. Mr Himank did not interfere in routine matters but instructed Mr Akhil to investigate the cause of increase in maintenance expenses.
A) Name and explain the principle of managerial control applied by Mr Himank in the above case.
B) Identify and state the subsequent step in the controlling process that must be undertaken by Mr Akhil to ensure that standards are accomplished. [4 Marks]

Answer 27.
A) The principle of managerial control applied by Mr Himank in the case is Management by Exception. Management by exception, which is often referred to as control by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management.
B) The subsequent step in the controlling process that must be undertaken by Mr Akhil to ensure that standards are accomplished is Taking Corrective Action: No corrective action is required when the deviations are within acceptable limits. However, when the deviations go beyond the acceptable range, especially in the important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished. In case the deviation cannot be corrected through managerial action, the standards may have to be revised.

Question 28. (A) 'Leaders play a key role in the success and excellence of any organisation'.
a) Elucidate the term 'leadership'.
b) Explain any two styles of leadership based on the use of authority.
OR
(B) 'Maslow's Need Hierarchy Theory of Motivation is based on human needs. He felt that within every human being, there exists a hierarchy of needs'
a) Define the term motivation.
b) Explain any two needs of human beings that according to Maslow formed part of the hierarchy. [4 Marks]

Answer 28.
(A)
a) Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals.
b) Any two styles of leadership depending on the use of authority:
(i) Autocratic or Authoritarian leader: An autocratic leader gives orders and expects his subordinates to obey those orders. If a manager is following this style, then communication is only one-way with the subordinate only acting according to the command given by the manager. This leader is dogmatic, i.e., does not change or wish to be contradicted. His following is based on the assumption that reward or punishment both can be given depending upon the result. This leadership style is effective in getting productivity in many situations like in a factory where the supervisor is responsible for production on time and has to ensure labour productivity. Quick decision-making is also facilitated.
(ii) Democratic or Participative leader: A democratic leader will develop action plans and make decisions in consultation with his subordinates. He will encourage them to participate in decision-making. This kind of leadership style is more common now-a-days, since leaders also recognise that people perform best if they have set their own objectives. They also need to respect the other's opinion and support subordinates to perform their duties and accomplish organisational objectives. They exercise more control by using forces within the group.
(iii) Laissez faire or Free-rein leader: Such a leader does not believe in the use of power unless it is absolutely essential. The followers are given a high degree of independence to formulate their own objectives and ways to achieve them. The group members work on their own tasks resolving issues themselves. The manager is there only to support them and supply them the required information to complete the task assigned.
OR (B)
a) Motivation means incitement or inducement to act or move. In the context of an organisation, it means the process of making subordinates to act in a desired manner to achieve certain organisational goals.
b) Maslow's theory was based on human needs. He felt that within every human being, there exists a hierarchy of five needs. These are: (Any two)
(i) Basic Physiological Needs: These needs are most basic in the hierarchy and correspond to primary needs. Hunger, thirst, shelter, sleep and sex are some examples of these needs. In the organisational context, basic salary helps to satisfy these needs.
(ii) Safety/Security Needs: These needs provide security and protection from physical and emotional harm. Examples: job security, stability of income, Pension plans etc.,
(iii) Affiliation/Belonging Needs: These needs refer to affection, sense of belongingness, acceptance and friendship.
(iv) Esteem Needs: These include factors such as self-respect, autonomy status, recognition and attention.
(v) Self Actualisation Needs: It is the highest level of need in the hierarchy. It refers to the drive to become what one is capable of becoming. These needs include growth, self-fulfillment and achievement of goals.

Question 29. Lisha Fabric Private Limited is a company manufacturing cotton garments. The Marketing Manager of the company notices a shift in Generation Z's expectations as they are becoming aware of ethical fashion. The company decides to collaborate with Hridyansh, a Tech Enthusiast who has invented an innovative machine that recycles plastic bottles to manufacture sustainable fabrics. Identify and explain the dimensions of the business environment highlighted in the above case. [4 Marks]

Answer 29.
1) Social Environment—The social environment of business includes the social forces like customs and traditions, values, social trends, society's expectations from business, etc. Traditions define social practices that have lasted for decades or even centuries. For example, the celebration of Diwali, Eid, Christmas, and Guru Parv in India provides significant financial opportunities for greeting card companies, sweets or confectionery manufacturers, tailoring outlets and many other related businesses. Values refer to concepts that a society holds in high esteem. Social trends present various opportunities and threats to business enterprises.
2) Technological Environment—Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business. For example, recent technological advances in computers and electronics have modified the ways in which companies advertise their products.

Question 30. Guruji Garments Ltd., a leading apparel manufacturing company in Ludhiana, produces winter wear for domestic and international markets. During the peak season, the Production Department increased output to meet rising demand. However, the Sales Department had not secured enough confirmed orders, leading to excess stock. At the same time, the Finance Department delayed releasing funds for raw materials, causing interruptions in production. As a result, confusion and conflict arose among different departments. The General Manager noticed that the departmental heads were not sharing the information regularly thus leading to lack of synchronisation of activities of different departments. The problem faced by Guruji Garments Ltd. mainly indicates absence of an important concept of management. Name the concept. State any three characteristics of the above identified concept. [4 Marks]

Answer 30.
A) Concept identified is Coordination
B) Characteristics of coordination are—(any three)
1. Coordination is a continuous process: Coordination is not a one-time function but a continuous process. It begins at the planning stage and continues till controlling.
2. Coordination is an all pervasive function: Coordination is required at all levels of management due to the interdependent nature of activities of various departments. It integrates the efforts of different departments and different levels. The purchase, production and sales departmental efforts have to be coordinated for achieving organisational objectives harmoniously.
3. Coordination integrates group efforts: Coordination unifies unrelated or diverse interests into purposeful work activity. It gives a common focus to group effort to ensure that performance is as it was planned and scheduled.
4. Coordination ensures unity of action: The purpose of coordination is to secure unity of action in the realisation of a common purpose. It acts as the binding force between departments and ensures that all action is aimed at achieving the goals of the organisation.
5. Coordination is a deliberate function: A manager has to coordinate the efforts of different people in a conscious and deliberate manner. Even where members of a department willingly cooperate and work, coordination gives a direction to that willing spirit.

Question 31. (A) Describe Product cost, Utility and demand and Marketing Methods used as factors determining the price of a product.
OR
(B) Describe the concepts of branding, packaging and labelling as elements of product mix. [6 Marks]

Answer 31.
(A) Following are the factors determining the price of a product:
1. Product cost: One of the most important factors affecting the price of a product or service is its cost. This includes the cost of producing, distributing and selling the product. The cost sets the minimum level or the floor price at which the product may be sold. Generally, all marketing firms strive to cover all their costs, at least in the long run. In addition, they aim at earning a margin of profit over and above the costs. In certain circumstances, for example, at the time of introducing a new product or while entering a new market, the products may be sold at a price, which does not cover all the costs. But in the long run, a firm cannot survive unless at least all its costs are covered. Semi variable costs are those costs which vary with the level of activity but not in direct proportion with it.
2. Utility and Demand: While the product costs set the lower limits of the price, the utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. In fact the price must reflect the interest of both the parties to the transaction-the buyer and the seller. The buyer may be ready to pay up to the point where the utility from the product is at least equal to the sacrifice made in terms of the price paid. The seller would, however, try to at least cover the costs. According to the law of demand, consumers usually purchase more units at a low price than at a high price.
3. Marketing Methods Used: Price fixation process is also affected by other elements of marketing such as distribution system, quality of salesmen employed, quality and promoted, these must be made available to customers at the right amount of advertising, sales promotion efforts, the type of packaging, product differentiation, credit facility and customer services provided. Similarly, the uniqueness of any of the elements mentioned above gives the company a competitive freedom in fixing prices of its products.
OR (B) The concepts of branding, packaging and labelling as elements of product mix:
- Branding: One of the most important decisions that a marketer has to take in the area of 'product' is in respect of branding. If products were sold by generic names, it would be very difficult for him to decide whether the firm's products will be marketed under a brand name or a generic name. Thus, most marketers give a name to their product, which helps in identifying and distinguishing their products from the competitors' products. This process of giving a name or a sign or a symbol etc., to a product is called branding.
- Packaging: Packaging refers to the act of designing and producing the container or wrapper of a product. Packaging plays a very important role in the marketing success or failure of many products, particularly the consumer non-durable products. In fact if one makes an analysis of the reasons for the success of some of the successful products in the recent past, it can be noted that packaging has played its due role.
- Labelling: A simple looking but important task in the marketing of goods relates to designing the label to be put on the package. The label may vary from a simple tag attached to the product (such as in case of local unbranded products like sugar, wheat, pulses, etc.) indicating some information about the quality or price, to complex graphics that are part of the package, like the ones on branded products. Labels are useful in providing detailed information about the product, its contents, method of use, etc.

Question 32. Astrick Ltd., a fast-growing FMCG company, decided to expand its operations by setting up a new manufacturing unit. To raise funds, the company issued shares to the public. After the issue, the company participated in a market which provided a platform for buying and selling of existing securities. Soon, Astrick Ltd. noticed that the market price of its shares was constantly changing based on the company's performance reports, economic conditions, and demand and supply. Investors felt confident because its dealings were well defined according to the existing legal framework. It also ensured that they could easily convert their investment into cash whenever needed and the savings of the investors could get channelised into the most productive investment opportunities.
(a) Name and give a suitable definition of the institution which as a market provides the platform referred to in the above case.
(b) Explain the functions of the institution identified in part a) discussed in the case. [6 Marks]

Answer 32.
(a) The institution that provides the platform is the Stock Exchange. According to the Securities Contracts (Regulation) Act, 1956, Stock Exchange means anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities.
(b) Functions of the institution discussed are:
1. Providing Liquidity and Marketability to existing Securities: The basic function of a stock exchange is the creation of a continuous market where securities are bought and sold. It gives investors the chance to disinvest and reinvest. This provides both liquidity and easy marketability to already existing securities in the market.
2. Pricing of Securities: Share prices on a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. Such a valuation provides important instant information to both buyers and Sellers in the market.
3. Safety of Transaction: The membership of a stock exchange is well-regulated and its dealings are well defined according to the existing legal framework. This ensures that the investing public gets a safe and fair deal on the market.
4. Contributes to Economic Growth: Through the process of disinvestment and reinvestment savings get channelised into their most productive investment avenues. This leads to capital formation and economic growth.

Question 33. India's IT services companies saw a sharp decline in the share prices on February 12, 2026 over persistent fears that the artificial intelligence (AI)-led disruption will affect their profits in the coming years. Awino, one of India's top IT solutions providers, in order to face the challenge, has decided to separate itself into several subsidiaries by product line: telecommunications, engineering, financial services, etc. Each subsidiary brings in about $300 million in annual earnings and is self-sufficient with their own accounting books, personnel and administrative functions. The decision making authority is shared with lower levels and is consequently placed nearest to the points of action. Explain briefly any four benefits Awino will get from this selective dispersal of authority. [6 Marks]

Answer 33.
Decentralisation is a fundamental step and its importance can be understood from the following points: (Any four)
(i) Develops initiative among subordinates: Decentralisation helps to promote self-reliance and confidence amongst the subordinates. This is because when lower managerial levels are given freedom to make their own decisions they learn to depend on their own judgment.
(ii) Develops managerial talent for the future: Formal training plays an important part in equipping subordinates with skills that help them rise in the organisation but equally important is the experience gained by handling assignments independently. Decentralisation gives them a chance to prove their abilities and creates a reservoir of qualified manpower who can be considered to fill up more challenging positions through promotions.
(iii) Quick decision making: In a decentralised organisation, however, since decisions are taken at levels which are nearest to the points of action and there is no requirement for approval from many levels, the process is much faster. There are also less chances of information getting distorted because it doesn't have to go through long channels.
(iv) Relief to top management: Decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide albeit within the limits set by the superior. Also, personal supervision is generally replaced by other forms of control such as return on investment etc.
(v) Facilitates growth: Decentralisation awards greater autonomy to the lower levels of management as well as divisional or departmental heads. This allows them to function in a manner best suited to their department and fosters a sense of competition amongst the departments.
(vi) Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results. The extent of achievement of organisational objectives as well as the contribution of each department in meeting the overall objectives can be ascertained. Decentralisation compels the management to innovative performance measurement systems.

Question 34. (A) Explain a) Procedure b) Strategy c) Rule as types of plans
OR
(B) Explain the following benefits of planning:
a) Planning facilitates decision making
b) Planning reduces the risk of uncertainty
c) Planning establishes standards of controlling [6 Marks]

Answer 34.
(A)
a) Procedure-Procedures are routine steps on how to carry out activities. They detail the exact manner in which any work is to be performed. They are specified in a chronological order. Procedures are specified steps to be followed in particular circumstances. They are generally meant for insiders to follow. The sequence of steps or actions to be taken are generally to enforce a policy and to attain pre-determined objectives. Policies and procedures are interlinked with each other.
b) Strategy-A strategy provides the broad contours of an organisation's business. It will also refer to future decisions defining the organisation's direction and scope in the long run. Thus, we can say a strategy is a comprehensive plan for accomplishing an organisation objectives. This comprehensive plan will include three dimensions, (i) determining long term objectives, (ii) adopting a particular course of action, and (iii) allocating resources necessary to achieve the objective. Whenever a strategy is formulated, the business environment needs to be taken into consideration.
c) Rule-Rules are specific statements that inform what is to be done. They do not allow for any flexibility or discretion. It reflects a managerial decision that a certain action must or must not be taken. They are usually the simplest type of plans because there is no compromise or change unless a policy decision is taken.
OR (B)
a) Planning facilitates decision making-Planning helps the manager to look into the future and make a choice from amongst various alternative courses of action. The manager has to evaluate each alternative and select the most viable proposition. Planning involves setting targets and predicting future conditions, thus helping in taking rational decisions.
b) Planning reduces the risk of uncertainty- Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance the tasks to be performed, planning shows the way to deal with changes and uncertain events. Changes or events cannot be eliminated but they can be anticipated and managerial responses to them can be developed.
c) Planning establishes standards of controlling-Planning involves setting of goals. Planning provides the goals or standards against which actual performance is measured. By comparing actual performance with some standard, managers can know whether they have actually been able to attain the goals. The nature of corrective action required depends upon the extent of deviations from the standard. Therefore, planning provides the basis of control.