CBSE Class 12 Entrepreneurship Question Paper 2026 Solved Code 98

SECTION A

1. Which of the following is not an element of business opportunity ? [1 Mark]
(A) Practicability of the idea
(B) Assured market scope
(C) Scheduling
(D) Potential of future growth

Answer: (C) Scheduling

Teacher's Note:
a) Scheduling is an element of the operational plan, not of a business opportunity.
b) Elements of a business opportunity include practicability of the idea, assured market scope, an acceptable rate of return, competence of the entrepreneur and potential of future growth.

2. Two statements labelled as Assertion (A) and Reason (R) are given below. Read both the statements carefully and choose the correct option : [1 Mark]
Assertion (A) : There is no fixed content for a business plan.
Reason (R) : The business plan varies according to the entrepreneur’s goals and targeted audience.
Options :
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Answer: (A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Teacher's Note:
a) A business plan has no fixed content because it is prepared to suit the entrepreneur's goals and the audience it is meant for.
b) The Reason directly explains why the content is not fixed, so option (A) is correct.

3. Rudra Café, a chain of organic cafés in Delhi, wanted to expand its business in other cities too. Due to rising inflation, the cost of organic products, dairy, coffee beans, etc., has risen sharply. At the same time, the Reserve Bank of India has increased interest rates, making bank loans more expensive. The café, therefore, delayed its expansion plans until borrowing becomes cheaper. Identify the element of macro environment affecting Rudra café. [1 Mark]
(A) Technological environment
(B) Economic environment
(C) Social environment
(D) Political environment

Answer: (B) Economic environment

Teacher's Note:
a) Inflation and interest rates are economic factors of the macro environment.
b) The clue words are "rising inflation" and "increased interest rates".

4. The process of creativity involves the following five steps :
(i) Idea germination
(ii) Incubation
(iii) Illumination
(iv) Preparation
(v) Verification
Identify the correct sequence of the steps from the options given below : [1 Mark]
(A) (i), (iii), (ii), (iv), (v)
(B) (i), (iv), (ii), (iii), (v)
(C) (iv), (ii), (i), (iii), (v)
(D) (v), (i), (iii), (iv), (ii)

Answer: (B) (i), (iv), (ii), (iii), (v)

Teacher's Note:
a) The correct order is idea germination, preparation, incubation, illumination and verification.
b) Remember that verification (testing the idea) is always the last step.

5. With rising awareness about environmental protection and harmful effects of chemical detergents, there is a growing demand for sustainable alternatives. Recognising this opportunity, Mohit plans to start an eco-friendly detergent manufacturing unit. For this, he prepares his business plan starting with its introductory profile. After that, he clearly states his ‘mission statement’ in the relevant section detailing the size, scope and nature of the enterprise.
The component of the business plan after introductory profile which begins with the ‘mission statement’ is : [1 Mark]
(A) Marketing strategy
(B) Description of venture/business venture
(C) Financial planning
(D) Risk analysis

Answer: (B) Description of venture/business venture

Teacher's Note:
a) The description of venture begins with the mission statement and describes the size, scope and nature of the business.
b) It comes right after the general introduction (introductory profile) in a business plan.

6. Horizontal merger is a merger between ___________. [1 Mark]
(A) firms that are involved in totally unrelated business activities.
(B) two companies that deal in the same products but in separate markets.
(C) two companies producing different goods or services for one specific finished product.
(D) companies in the same industry.

Answer: (D) companies in the same industry.

Teacher's Note:
a) Option (A) describes a conglomerate merger, (B) a market extension merger and (C) a vertical merger.
b) A horizontal merger joins competitors working in the same industry.

7. The first stage in the ‘Enterprise Process Diagram’ is ___________. [1 Mark]
(A) Identifying a product or service
(B) Opportunity spotting by analysing the needs and problems that exist in the environment
(C) Evaluating the ideas received from different sources to find a creative solution
(D) Setting up a project and nurturing it to success

Answer: (B) Opportunity spotting by analysing the needs and problems that exist in the environment

Teacher's Note:
a) The enterprise process starts with spotting an opportunity in the environment.
b) Finding a creative solution and setting up the project come in later stages.

8. ‘Price skimming’ is used : [1 Mark]
(A) for a limited duration to recover most of the investment made to build the product.
(B) to attract new customers and increase market share or sales volume.
(C) for products and services where dickering over the price of goods is considered the norm.
(D) to cover the cost of producing a product plus a reasonable profit.

Answer: (A) for a limited duration to recover most of the investment made to build the product.

Teacher's Note:
a) Option (B) describes penetration pricing, (C) variable pricing and (D) cost-plus pricing.
b) Skimming charges a high price at launch for a short period to recover investment quickly.

9. Refer to the picture given below and identify the type of channel of distribution : [1 Mark]
(A) Three-level channel
(B) Two-level channel
(C) One-level channel
(D) Zero-level channel

[Figure: Three photographs joined by arrows from left to right, labelled Producer (a factory floor), Retailer (a shopkeeper in a grocery shop) and Customer (a man in a shop)]

Answer: (C) One-level channel

Teacher's Note:
a) There is only one middleman (the retailer) between the producer and the customer.
b) Count the middlemen to find the level: none is zero-level, one is one-level, two is two-level.

For Visually Impaired Candidates (in lieu of Q. 9)

When the producer wants to be fully relieved of the problem of distribution, and agents distribute the product among wholesalers and wholesalers distribute the product among a number of retailers, who then finally sell it to the ultimate consumers, the type of channel of distribution is : [1 Mark]
(A) Three-level channel
(B) Two-level channel
(C) One-level channel
(D) Zero-level channel

Answer: (A) Three-level channel

Teacher's Note:
a) There are three middlemen: agents, wholesalers and retailers.
b) This longest channel relieves the producer fully of the work of distribution.

10. When a private company takes over a public company, the type of acquisition is : [1 Mark]
(A) Friendly acquisition
(B) Reverse acquisition
(C) Back flip acquisition
(D) Hostile acquisition

Answer: (B) Reverse acquisition

Teacher's Note:
a) In a reverse acquisition, a private company takes over a public company, often to get listed without an IPO.
b) In a back flip acquisition, the buyer becomes a subsidiary of the company it buys.

11. Riya, a young entrepreneur, set up a venture to manufacture biodegradable food containers from agricultural waste. She first identified the features of the product, design, as well as the resources that will be needed, obtained the required resources and applied the resources to accomplish the plan by manufacturing the food containers. By doing all this, Riya has followed various elements/steps in the innovation process. The next element/step in this process is : [1 Mark]
(A) Analytical planning
(B) Resource organisation
(C) Commercial application
(D) Implementation

Answer: (C) Commercial application

Teacher's Note:
a) Riya has completed analytical planning, resource organisation and implementation.
b) The last element, commercial application, means providing value to customers and rewarding employees and stakeholders.

12. Which of the following is not included while calculating Gross working capital ? [1 Mark]
(A) Cash
(B) Inventory
(C) Short-term loans
(D) Accounts Receivable

Answer: (C) Short-term loans

Teacher's Note:
a) Gross working capital is the total of current assets only.
b) Short-term loans are a current liability, so they are left out.

13. If a company’s ‘cash conversion cycle’ is 45 days, it implies : [1 Mark]
(A) the company requires 45 days to manufacture the goods.
(B) the length of time between a firm’s purchase of inventory and the receipt of cash from accounts receivable is 45 days.
(C) the company pays the amount due to its creditors in 45 days.
(D) that the length of time between the manufacturing of goods and sale of goods is 45 days.

Answer: (B) the length of time between a firm’s purchase of inventory and the receipt of cash from accounts receivable is 45 days.

Teacher's Note:
a) The cash conversion cycle runs from cash spent on inventory back to cash received from debtors.
b) Options (A) and (D) cover only a part of the cycle.

14. Match the components of Marketing Mix given in Column I with their Meaning given in Column II. Identify the correct option from those given below : [1 Mark]
Column I | Column II
(1) Product | (a) It refers to the point of sale.
(2) Price | (b) It refers to all activities undertaken to make the product or service known to the user and trade.
(3) Place | (c) It refers to the item actually being sold.
(4) Promotion | (d) It refers to the value that is put on the product.
Options :
(A) (1)-(a), (2)-(b), (3)-(c), (4)-(d)
(B) (1)-(c), (2)-(d), (3)-(a), (4)-(b)
(C) (1)-(d), (2)-(b), (3)-(c), (4)-(a)
(D) (1)-(a), (2)-(d), (3)-(c), (4)-(b)

Answer: (B) (1)-(c), (2)-(d), (3)-(a), (4)-(b)

Teacher's Note:
a) Product is the item sold, price is its value, place is the point of sale and promotion makes it known.
b) Match the easiest pair first (Product - item being sold) to rule out wrong options quickly.

15. While calculating the Economic Order Quantity, it is necessary that a company should know how much the ‘Inventory Carrying Cost’ is and what does it include. From the following, identify the item which is not included in ‘Inventory Carrying Cost’ : [1 Mark]
(A) Interest
(B) Paperwork for placing order
(C) Space cost
(D) Insurance

Answer: (B) Paperwork for placing order

Teacher's Note:
a) Paperwork for placing an order is an ordering cost, not a carrying cost.
b) Carrying cost includes interest, space (storage) cost, insurance and similar costs of holding stock.

16. Aditya Verma, the founder of a ‘Fintech’ startup, wanted to raise funds for expanding his digital lending platform. Instead of approaching the general public, he decided to directly sell securities of his company to a limited number of sophisticated investors including Life Insurance Corporation of India, General Insurance Corporation of India, and Army Group Insurance. The method of raising capital used by Aditya Verma was : [1 Mark]
(A) Public issue
(B) Rights issue
(C) Private placement
(D) Offer to the employees

Answer: (C) Private placement

Teacher's Note:
a) Selling securities directly to a limited number of sophisticated investors is private placement.
b) The clue is "Instead of approaching the general public".

17. ‘Zen MotoCorp’, a leading motorcycle manufacturer, requires batteries for its production units. The procurement lead time is two months and the demand during this period is expected to be 2000 batteries per month, making its reorder point at 4000 batteries. Fresh supplies should arrive just as the stock reaches zero. However, due to variability in the rate of demand (or consumption) as well as in the supply or manufacturing lead time etc., it may reach a zero stock status before the supply arrives. To cater to such variability, it decides to add 500 batteries to its reorder level. The reorder level would now be 4500 batteries.
The addition of 500 batteries in the reorder point is known as : [1 Mark]
(A) Average Inventory
(B) Annual demand for the item
(C) Economic Order Quantity
(D) Safety Stock

Answer: (D) Safety Stock

Teacher's Note:
a) Safety stock is the extra stock kept to meet changes in demand or lead time.
b) Reorder level with safety stock = Lead time demand + Safety stock = 4000 + 500 = 4500 batteries.

18. Public issue is the most popular method of raising capital these days by entrepreneurs, which involves raising of funds directly from the public through the issue of prospectus.
Which of the following is an advantage of raising funds through public issue ? [1 Mark]
(A) It increases accountability to public shareholders.
(B) It can be used for businesses to grow through acquisitions.
(C) It increases costs in complying with higher level of reporting requirements.
(D) It needs to maintain dividend and profit growth trends.

Answer: (B) It can be used for businesses to grow through acquisitions.

Teacher's Note:
a) Options (A), (C) and (D) are burdens or disadvantages of going public.
b) Funds and listed shares from a public issue help a business grow by acquiring other firms.

SECTION B

19. Read the following text carefully :
Arun runs a mid-sized bakery chain that is expanding into new cities. To manage operations smoothly, his management team needs a document that lays out production schedules, staffing requirements, raw material management, and daily operational processes. Since this document contains technical and internal information, it is not useful for outside investors or customers.
On the basis of the given information, identify and state the format of business plan discussed above. [2 Marks]

Answer:
Format of business plan: An Internal Operational Plan.
It is a detailed plan describing the planning details that are needed by the management but may not be of interest to external stakeholders.

Teacher's Note:
a) Identification carries 1 mark and the explanation carries 1 mark.
b) The clue is "it is not useful for outside investors or customers", which means the plan is for internal use.

20. (a) Explain the following two steps of the process of creativity : [2 Marks]
(i) Preparation (ii) Verification

Answer:
(i) Preparation: On the basis of the idea, interest and curiosity, the entrepreneur judges the need and starts looking for ways to implement the idea. If the idea is to launch a new product or service, market research is conducted, and the entrepreneur foresees the future of the product.
(ii) Verification: It is also called the validation or testing stage. The idea is verified to prove that it has value. It is the most difficult phase of creativity as obstacles begin to appear, and knowledge is developed into application.

Teacher's Note:
a) Each step carries 1 mark.
b) Keywords: market research for preparation; validation or testing for verification.

OR

(b) The idea and opportunity assessment process involves a number of steps. Explain the next two steps after ‘Product identification’ that an entrepreneur should consider in this process. [2 Marks]

Answer:
1. Application and use: Ideas should be examined for their real-life use and application. If the product already exists in the market, its present use is found out and it may be modified for better use.
2. Level of operation: This is a crucial test for product or service identification. Depending on the use of the product or service, the entrepreneur decides whether to produce it in a cottage industry, a small-scale industry or a large-scale industry.

Teacher's Note:
a) Each step carries ½ mark for the heading and ½ mark for the explanation.
b) Write the steps in the correct order: application and use comes before level of operation.

21. Explain ‘Contract Explanation’ and ‘Operations Manual’ as main ingredients of a franchise agreement. [2 Marks]

Answer:
1. Contract Explanation: This section of the agreement outlines the type of relationship the franchisee is entering into with the franchisor.
2. Operations Manual: This section of the agreement details the guidelines that the franchisee must legally follow in operating the business, as outlined by the franchisor.

Teacher's Note:
a) Each ingredient carries 1 mark.
b) Keywords: "type of relationship" for contract explanation and "guidelines to be legally followed" for operations manual.

22. (a) Explain ‘Public Relations’ as a tool of promotion used by companies to promote their products and services. [2 Marks]

Answer: Public relations is a deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation and its public. It builds good relations with the stakeholders of the business by obtaining favourable publicity, building a good corporate image and handling or heading off unfavourable rumours, stories and events.

Teacher's Note:
a) Keywords examiners look for: deliberate, planned and sustained effort, mutual understanding and favourable publicity.
b) Mention both building a good image and handling unfavourable rumours.

OR

(b) In the picture above a seminar organized by ‘Hi-end-fashion Designer’ to increase, its sales is being depicted.
This is an example of which of the following sales promotion activities ? [2 Marks]
(A) Customer Promotions
(B) Business Promotions
(C) Trade Promotions
(D) Salesforce Promotions

[Figure: Photograph of a seminar in an auditorium, with a speaker standing at a podium on a stage and rows of seated people facing him]

Answer: (B) Business Promotions

Teacher's Note:
a) Seminars, conferences and trade shows organised for business buyers are business promotions.
b) Customer promotions target final consumers through offers like discounts and free samples.

For Visually Impaired Candidates (in lieu of Q. 22(b))

(b) ‘A company organises sales-competitions among their salesforce and announces various prizes for the winners to increase the sales.’
This is an example of which of the following sales promotion activities ? [2 Marks]
(A) Customer Promotions
(B) Business Promotions
(C) Trade Promotions
(D) Salesforce Promotions

Answer: (D) Salesforce Promotions

Teacher's Note:
a) Sales competitions and prizes for the company's own salespeople are salesforce promotions.
b) They motivate the salesforce to push up sales.

23. (a) ‘Tech Supplies Ltd.’ sells bluetooth speakers and needs to maintain a smooth supply to meet customer demand. Annual quantity of bluetooth speakers sold by the company is 2500 units. Cost of placing an order and receiving the bluetooth speakers is Rs. 50 per order. Inventory holding cost per unit is Rs. 25 per annum.
Calculate the Economic Order Quantity (EOQ) for ‘Tech Supplies Ltd.’ [2 Marks]

Answer:
Formula: \( \text{EOQ} = \sqrt{\dfrac{2PD}{C}} \)
where P = Cost of placing and receiving one order = Rs. 50
D = Annual demand for the item = 2,500 units
C = Inventory carrying/holding cost per unit = Rs. 25
\( \text{EOQ} = \sqrt{\dfrac{2 \times 50 \times 2{,}500}{25}} \)
\( = \sqrt{10{,}000} \)
= 100 bluetooth speakers (units)

Teacher's Note:
a) Marks: 1 for the formula, ½ for the calculation and ½ for the final answer.
b) Check: \( 100^{2} = 10{,}000 \), so the square root is correct.

OR

(b) ‘Sunshine Fabrics Ltd.’ earned a net profit of Rs. 50,000 last year. The shareholders’ equity is Rs. 2,50,000 and the company took a loan of Rs. 2,50,000. Interest on loan @ 10% per annum is Rs. 2,500.
Calculate Return on Equity (ROE) and Return on Investment (ROI) for ‘Sunshine Fabrics Ltd.’ [2 Marks]

Answer:
Return on Equity:
\( \text{ROE} = \dfrac{\text{Net Income}}{\text{Equity}} \times 100 \)
Net Income = Net Profit - Interest on loan = Rs. 50,000 - Rs. 2,500 = Rs. 47,500
\( \text{ROE} = \dfrac{47{,}500}{2{,}50{,}000} \times 100 = 19\% \)
(Alternative accepted by the marking scheme: taking net income as Rs. 50,000, \( \text{ROE} = \dfrac{50{,}000}{2{,}50{,}000} \times 100 = 20\% \))
Return on Investment:
\( \text{ROI} = \dfrac{\text{Net Profit}}{\text{Total Capital Invested}} \times 100 \)
\( = \dfrac{50{,}000}{2{,}50{,}000} \times 100 \)
= 20%

Teacher's Note:
a) Each ratio carries ½ mark for the formula and ½ mark for the final answer.
b) Always write the formula first, as it carries marks even if the working goes wrong.

24. ‘Swadisht’, an online food delivery platform, has been in business for the last ten months. It is now planning to launch its advertising campaign ‘Bhook Lage Toh Swadisht Khao’. The campaign aims to inform and improve its brand image as a household, friendly and trustworthy service. This advertising campaign is for working professionals who often struggle with time constraints for cooking at home and also for teenagers who love ‘Swadisht’ food.
Identify and state any two rules considered by ‘Swadisht’ online food delivery platform, while planning to launch its advertising activity. [2 Marks]

Answer:
1. Aim: To decide the primary purpose of the advertisement - whether it is to inform, sell, produce listings or improve the image of the business.
Line: "The campaign aims to inform and improve its brand image as a household, friendly and trustworthy service."
2. Target: To decide who the target customers are and from which sector of the public a response is wanted - male, female, adult, teenager, child, mother, father, etc.
Line: "This advertising campaign is for working professionals who often struggle with time constraints for cooking at home and also for teenagers who love ‘Swadisht’ food."

Teacher's Note:
a) Each rule carries ½ mark for the heading and ½ mark for stating it.
b) The words "aims to inform" point to Aim, and "working professionals" and "teenagers" point to Target.

SECTION C

25. Reen, a young entrepreneur, noticed that urban consumers were becoming increasingly health-conscious and preferred products that were both nutritious and convenient to use. She decided to study the market to understand the trends of demand, supply and consumer preferences. The research revealed that more people are adopting health-focused diets and prefer products made from natural ingredients.
Based on this insight, Reena decided to start a business of producing ready-to-drink bottled juices extracted from the locally grown organic citrus and other fruits.
By quoting lines, identify and explain the two idea fields discussed in the above case. [3 Marks]

Answer:
1. Market driven/Demand driven idea:
Line: "She decided to study the market to understand the trends of demand, supply and consumer preferences."
Explanation: Ideas come from market research, which is any organised effort to gather information about target markets or customers.
2. Natural resources:
Line: "Reena decided to start a business of producing ready-to-drink bottled juices extracted from the locally grown organic citrus and other fruits."
Explanation: Ideas can be generated from natural resources. A product or service may be derived from forest resources, agriculture, horticulture, minerals, animal husbandry, wind, sun and human resources.

Teacher's Note:
a) Each idea field carries ½ mark for identification, ½ for quoting the line and ½ for explanation.
b) Quote the exact line from the case inside quotation marks; do not paraphrase it.

26. Kavita owns a small restaurant in her city and is always looking for ways to stay ahead of her competitors. She makes it a point to go to her restaurant regularly as well as other restaurants and spends time watching and observing what people are eating, wearing and doing. She also talks to the customers to get inputs on what they are thinking and buying.
Quoting lines from the above para, state two ways of trend spotting being used by Kavita. [3 Marks]

Answer:
1. Watch trends:
Line: "She makes it a point to go to her restaurant regularly as well as other restaurants and spends time watching and observing what people are eating, wearing and doing."
Explanation: The entrepreneur regularly spends time watching and observing what the target customers are eating, doing, wearing and using.
2. Talk trends:
Line: "She also talks to the customers to get inputs on what they are thinking and buying."
Explanation: Talking to people is an important trend-spotting tactic. The entrepreneur talks to existing and prospective customers, online and offline, to learn what they are thinking, buying, craving and doing.

Teacher's Note:
a) Each way carries ½ mark for identification, ½ for quoting and ½ for explanation.
b) The other two ways of spotting trends are read trends and think trends.

27. (a) ‘Selection of a product or service will depend upon many factors.’ While assessing the market, an entrepreneur has to prepare details based on these factors. Explain any two such factors. [3 Marks]

Answer:
1. Demand: Demand assessment is based on the size of the market being targeted, that is local, state level or national/international market. It also involves a study of the target groups of consumers, their preferences, tastes and other related variables.
2. Supply and nature of competition: The supply position gives a complete picture of the quantities of the product made available in the market by all the existing players. It should also take into account future supplies from possible new entrants in the field.

Teacher's Note:
a) Each factor carries ½ mark for the heading and 1 mark for the explanation.
b) Other valid factors: cost and price of the product, and project innovation and change.

OR

(b) State any six reasons why a substantial number of entrepreneurs prefer to form a private company in spite of certain restrictions imposed on it under the Companies Act. [3 Marks]

Answer:
1. Only two members are required to form a private company.
2. Only two directors are required to constitute the quorum to validate the proceedings of meetings.
3. It can commence its business immediately after incorporation.
4. A non-member cannot inspect the copies of the Profit and Loss A/c filed with the Registrar.
5. The limit on payment of maximum managerial remuneration does not apply to a private company.
6. Directors of a private company need not have qualification shares.

Teacher's Note:
a) Each reason carries ½ mark; give exactly six.
b) Other valid reasons: restrictions on appointment of a managing director do not apply, and an index of members need not be maintained.

28. (a) Give the meaning of ‘sales strategy’. Explain two basic types of sales strategies. [3 Marks]

Answer:
Meaning: A sales strategy is a plan that positions a company’s brand or product to gain a competitive advantage.
Types of sales strategies:
1. Direct sales strategy: Salespeople attack the competition head on while talking to the customer. They talk about each feature of the competitor’s product and compare it with their own. It is also known as ‘negative selling’.
2. Indirect sales strategy: It uses more subtle techniques by showing features and benefits not available in the competitor’s products or services, without even naming them. It is a positive sales strategy.

Teacher's Note:
a) Meaning carries 1 mark; each type carries ½ mark for the heading and ½ mark for the explanation.
b) Remember: direct is negative selling, indirect is positive selling.

OR

(b) Give the meaning of promotion as a ‘promotion strategy’. Explain any two approaches a company can use to promote its products. [3 Marks]

Answer:
Meaning: Promotion strategy is a method which spreads the word about the product or service to customers, stakeholders and the broader public.
Approaches (any two):
1. Above-the-line: It uses mass media methods and focuses on advertising to a large audience. It includes conventional media like print, online, television, billboard and cinema advertising.
2. Below-the-line: These are very specific, memorable activities focused on targeted groups of consumers. They develop the brand by creating awareness and building a brand profile through sponsorship, sales promotion, public relations, personal selling and direct marketing.

Teacher's Note:
a) Meaning carries 1 mark; each approach carries ½ mark for the heading and ½ mark for the explanation.
b) Through-the-line, which uses both above-the-line and below-the-line communications, is another valid approach.

29. ‘A hair oil bottle of 100 ml of a company is priced at Rs. 50, while a 1000 ml/1 litre bottle is priced at Rs. 400.’
(a) Identify and explain the method of pricing discussed above.
(b) Also explain how the method of pricing identified in (a) above functions in the real-estate market. [3 Marks]

Answer:
(a) Variable price method.
Variable pricing is a marketing approach that permits different rates to be extended to different customers for the same goods or services.
(b) In the real-estate market, prospective buyers often submit bids for properties that are less than the posted asking price, hoping that the seller will accept a smaller amount. This often leads to a series of offers and counter offers that sometimes result in a sale. At other times, the two parties cannot come to terms and no sale takes place.

Teacher's Note:
a) Marks: 1 for identification, 1 for explanation and 1 for part (b).
b) The same hair oil costs Rs. 50 per 100 ml in the small bottle but only Rs. 40 per 100 ml in the large bottle, so the rate varies.

SECTION D

30. (a) Explain any five elements of an operational plan. [5 Marks]

Answer:
1. Routing: It determines the exact route or path a product or service has to follow, right from raw material till its transformation into the finished product.
2. Scheduling: It means fixing the time, day and date when each operation is to be started and completed. It determines the time required to perform each operation.
3. Dispatching: It is the process of starting production according to the pre-planned production plan. It includes issuing the necessary orders, instructions, guidelines and information to give a practical shape to the plan.
4. Follow-up: It relates to evaluation and appraisal of the work performed. A properly planned follow-up procedure helps in detecting errors and defects in the work.
5. Inspection: It compares materials, products or performance with established standards. It helps the entrepreneur set up laboratories or methods to ensure the predetermined quality of the product or service.

Teacher's Note:
a) Each element carries ½ mark for the heading and ½ mark for the explanation.
b) Shipping, which describes the flow of goods or services from production to consumers, is another valid element.
c) Do not mix up routing (the path) with scheduling (the time).

OR

(b) Explain the first five steps for preparing the marketing plan. [5 Marks]

Answer:
1. Business situation analysis: It answers "Where have we been?". For a new venture it covers the entrepreneur's personal profile, product development details, the need the product satisfies, the entrepreneur's prior experience and planned market segmentation.
2. Identify the target market: It clearly defines the specific group of potential customers whose needs the enterprise aims to fulfil. The market is divided into smaller groups on the basis of consumer characteristics (geographic, demographic, psychographic) and buying situations, and the segments to target are selected.
3. Conduct SWOT analysis: The entrepreneur studies the target market with respect to strengths, weaknesses, opportunities and threats to ensure the success of the new firm.
4. Establish goals: It answers where the enterprise wants to go. Goals should be realistic, attainable, well-defined, quantified for control, and limited in number to avoid confusion and overlapping.
5. Define marketing strategy: It answers "How do we get there?". Specific activities are outlined to meet the goals, with decisions on the 4 P's - product, price, promotion and place.

Teacher's Note:
a) Each step carries ½ mark for the heading and ½ mark for the explanation.
b) Write the steps in the correct order; the sequence itself is being tested.

31. Read the following text carefully :
Raghav loved baking and started a small café in his neighbourhood. He personally managed the menu, finances and customer orders. Word spread quickly and soon the café became a popular weekend spot.
However, as the number of customers grew, Raghav found it difficult to handle supplies, accounts and marketing alone. He was also facing shortage of capital to meet customers’ demands.
He discussed the matter with his friend, Vikas, who said that in today’s era of specialization, expansion and diversification, it is not possible for a person to handle everything alone.
Vikas suggested that his sister, Mira, who was a chartered accountant with six years experience in hotel management, could join him. Mira would not only contribute capital but also her valuable experience to the business and help in expanding the café’s reach. Raghav agreed and they decided to run the café jointly.
On the basis of the given text, answer the following questions :
(a) Identify the forms of business organisation highlighted above.
(b) State any four features of each form of business organisation identified in (a) above. [5 Marks]

Answer:
(a) Sole proprietorship and Partnership.
(b) Features of sole proprietorship (any four):
1. It has individual ownership.
2. It has individual management and control by the sole proprietor.
3. There is no separate legal entity of the business.
4. The proprietor has unlimited liability.
Features of partnership (any four):
1. There must be at least two persons to enter into a contract to form a partnership.
2. The relation of partnership arises from an agreement or contract.
3. The liability of partners in a partnership firm is unlimited.
4. There is mutual agency among partners, where the business can be carried on by all the partners or any one of them acting for all.

Teacher's Note:
a) Marks: ½ each for identifying the two forms and ½ each for four features of each form.
b) "He personally managed the menu, finances and customer orders" shows sole proprietorship; "they decided to run the café jointly" shows partnership.
c) Other valid features: sole beneficiary of profits and easy formation (sole proprietorship); utmost good faith and restriction on transfer of share (partnership).

32. Reena opened a franchise of a well-known fast food chain. One of the main reasons she entered into this business was that it already had an accepted name. She did not have to spend resources trying to establish the credibility of the business as it already exists.
The franchisor also provided managerial assistance to her. She was offered training on all aspects of operating the franchise including accounting, personnel management, marketing and production.
The franchisor also offered her years of experience in business and knowledge of the market. However, she started facing challenges soon. The franchisor exerted a high degree of control which limited her ability to experiment with new ideas leaving her feeling over-guided or over-influenced. Moreover, apart from the original franchise fee, Reena had to share a percentage of her revenue as ongoing royalty. Additional costs were also charged for services like advertising and training. These expenses made the business model far more expensive than she had anticipated.
Identify and explain three advantages and two disadvantages of the franchise mode of expansion, as discussed above. [5 Marks]

Answer:
Advantages:
1. Product acceptance: The franchisee works under an established brand name with recognised products or services. Customer trust and brand reputation already exist, so less effort and cost is needed to build credibility.
2. Management expertise: The franchisor provides training and ongoing support in operations, marketing, accounting and management. This helps the franchisee run the business effectively and reduces operational mistakes.
3. Knowledge of the market: The franchisor offers industry experience and market insights about target customers, competition and effective strategies. This improves the franchisee's decision-making.
Disadvantages:
1. Right and the only way of doing things: A franchise contract limits the franchisee's freedom. The franchisor exerts an over-guided and over-influenced degree of control, so the freedom to innovate is lost to some extent.
2. Continuing costs implications: Apart from the initial franchise fee, the franchisee must pay ongoing royalties and other charges. These recurring payments make it costly and may reduce profit margins.

Teacher's Note:
a) Each point carries ½ mark for the heading and ½ mark for the explanation.
b) Case clues: "accepted name" (product acceptance), "managerial assistance" and "training" (management expertise), "knowledge of the market", "over-guided or over-influenced" and "ongoing royalty".

33. ‘Star Bakery Pvt. Ltd.’ produces two types of cakes - Chocolate Cake and Vanilla Cake. The company wants to know the break-even point of each type of cake. For the same, the following information is available :
Product | Selling Price Per Unit (Rs.) | Variable Cost Per Unit (Rs.) | Sales Mix %
Chocolate Cake | 200 | 120 | 40
Vanilla Cake | 150 | 90 | 60
Total fixed cost is Rs. 1,15,600.
(a) Calculate the break-even point in units of sales mix.
(b) Calculate the number of units of each product at break-even point.
(c) Also calculate break-even point in rupees. [5 Marks]

Answer:
Contribution margin per unit = Selling price - Variable cost
Chocolate Cake = Rs. 200 - Rs. 120 = Rs. 80
Vanilla Cake = Rs. 150 - Rs. 90 = Rs. 60
Weighted contribution margin = Contribution margin \( \times \) Sales mix %
Chocolate Cake = \( 80 \times \dfrac{40}{100} = 32 \)
Vanilla Cake = \( 60 \times \dfrac{60}{100} = 36 \)
Weighted average contribution margin per unit = 32 + 36 = Rs. 68
(a) Overall break-even point = \( \dfrac{\text{Total Fixed Cost}}{\text{Weighted Average Contribution Margin per unit}} \)
\( = \dfrac{1{,}15{,}600}{68} = 1{,}700 \) units
(b) Break-even point of Chocolate Cake = \( 1{,}700 \times 40\% = 680 \) units
Break-even point of Vanilla Cake = \( 1{,}700 \times 60\% = 1{,}020 \) units
(c) Break-even point in rupees = Units at break-even point \( \times \) Selling price per unit
Chocolate Cake = \( 680 \times 200 = \) Rs. 1,36,000
Vanilla Cake = \( 1{,}020 \times 150 = \) Rs. 1,53,000
Total break-even point in rupees = Rs. 1,36,000 + Rs. 1,53,000 = Rs. 2,89,000

Teacher's Note:
a) Marks: 1 for contribution margin, 1 for weighted average contribution margin, ½ for the BEP formula, ½ for overall BEP in units, 1 for product-wise units and 1 for BEP in Rs.
b) Check: total contribution at BEP = \( 680 \times 80 + 1{,}020 \times 60 = 1{,}15{,}600 \), which equals the fixed cost.

34. (a) Define ‘Capital Market’. Explain, by giving any three points, why capital markets are the most important source of raising finance for entrepreneurs. Also give the meaning of ‘Financial Intermediation’. [5 Marks]

Answer:
Capital market: A capital market is an organised mechanism for the effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs.
Capital markets are important for entrepreneurs because they:
1. Mobilise financial resources on a nation-wide scale.
2. Secure foreign capital and know-how.
3. Ensure effective allocation of resources by directing funds to projects with the highest potential yield or to underdeveloped priority areas.
Financial intermediation: The process of transferring financial resources from the surplus units to the deficit units is called financial intermediation.

Teacher's Note:
a) Marks: 1 for the definition, 1 each for three points and 1 for financial intermediation.
b) Keywords: "organised mechanism" for capital market and "surplus units to deficit units" for financial intermediation.

OR

(b) Give the meaning of ‘Venture Capital’. Explain how entrepreneurs can seek venture capital at ‘Early-stage financing’ and ‘Last-stage financing’. [5 Marks]

Answer:
Meaning: Venture capital is a type of private equity capital provided as seed funding to early-stage, high-potential, high-risk growth companies or entrepreneurs who lack the experience and funds to give shape to their ideas.
Early-stage financing includes three stages:
1. Seed capital finance: Capital is provided at the pre-commercialisation stage for research and initial development of an idea or prototype. The venture capitalist evaluates the technical and economic feasibility of the idea. The risk is very high, so the entrepreneur must show strong capability and market potential.
2. Start-up finance: Funding is provided once the idea qualifies for further investment. The entrepreneur presents a business plan to the venture capitalist, develops the product or prototype, and sets up the organisation and management team.
3. Second-round financing: It is provided when the product is already being produced and sold. Funds are used for expansion, modernisation or diversification to achieve growth and stability.
Last-stage financing (bridge or pre-public stage): This is the final stage of venture capital financing. Its main aim is to prepare the venture to go public so that investors can exit with profits. The business already has some market share and needs funds for expansion, mergers, strengthening its market position and preparing for a public issue.

Teacher's Note:
a) Marks: 1 for the meaning, 1 each for the three early stages and 1 for last-stage financing.
b) Name all three early stages: seed capital, start-up finance and second-round financing.
c) Keywords for last stage: go public and investors exit with profits.

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