CBSE Class 12 Business Studies Controlling MCQs Set F

One mark questions:

Question: Management audit is a technique to keep a check on the performance of
a) Customers
b) Management of the company
c) Company
d) Shareholders
Answer: b

Question: Budgetary control requires the preparation of
a) Responsibility centres
b) Budgets
c) Training schedule
d) Network diagram
Answer: b

Question: Controlling function of an organisation is
a) Forward looking
b) Backward looking
c) None of the above
d) Forward as well as backward looking
Answer: d

Question: Which of the following is not applicable to responsibility accounting?
a) Profit Centre
b) Cost Centre
c) Accounting Centre
d) Investment Centre
Answer: c

Question: What is Ratio analyis?
Answer: Ratio analysis refers to analysis of financial statements through computation of ratios such as current ratio, operating ratio, debt equity ratio and so on.

Question: What is Standard in controlling process?
Answer: Standard is the criteria (yardstick) against which the actual performance would be measured.

Question: Expand PERT/CPM/MIS.
Answer: PERT- Programme Evaluation and Review Technique
CPM – Critical Path Method
MIS- Management Information System.

Question: What is meant by Controlling?
Answer: Controlling means ensuring that activities in an organisation are performed as per the plans .
OR
Controlling is the process of ensuring that actual activities conform to planned activities.

Two mark questions :

Question: State any two Traditional techniques of Managerial control.
Answer:
a) Personal observation
b) Statistical reports
c) Break even analysis
d) Budgetary control

Question: Give the meaning of break-even analysis.
Answer: Break even analysis is a technique used by managers to study the relationship between costs, volume, and profits.
It determines the probable profit and losses at different levels of activity.
The sales volume at which there is no profit, no loss is known as break even point.
Break even point = fixed costs
Selling price per unit – variable cost per unit

Question: Define Managerial Control.
Answer: According to KOONTZ and O’DONNEL, “Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.”

Question: What do you understand by budgetary control?
Answer: Budgetary control is a managerial control technique in which all operations are planned in advance in the form of budgets and actual results are compared with
budgetary standards. A budget is a quantitative statement for a definite future period of time for the purpose of obtaining a given objective.

Question: State any two Modern techniques of Managerial control.
Answer:
a) Return on investment
b) Ratio analysis
c) Responsibility accounting
d) Management audit
e) PERT and CPM
f) Management information system

Question: What is Responsibility accounting?
Answer: Responsibility accounting is a system of accounting in which different sections, divisions, and departments of an organisation are set up as ‘responsibility centres’ such as cost centre, revenue centre, profit centre and so on. The head of the centre is responsible for achieving the target set for his centre.

Four mark questions :

Question: A good control system helps an organisation in many ways’- justify this statement with any four points.
Answer: A good control system helps an organisation in the following ways:
(i) Accomplishing organizational goals:
The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organisation and keeps it on the right track so that organisational goals might be achieved.
(ii) Judging accuracy of standards:
A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards considering such changes.
(iii) Making efficient use of resources:
By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most effective and efficient manner.
(iv) Improving employee motivation:
A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance.
(v) Ensuring order and discipline:
Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimize dishonest behavior on the part of the employees by keeping a close check on their activities.
(vi) Facilitating coordination in action:
Controlling provides direction to all activities and efforts for achieving organisational goals. Each department and employee are governed by pre-determined standards which are well coordinated with one another. This ensures that overall organisational objectives are accomplished.

Question: Briefly explain the relationship between planning and controlling.
Answer:
1) Planning and controlling are inseparable twins of management.
2) These standards of performance which serve as the basis of controlling are provided by planning.
3) Controlling discover deviations and initiate corrective measures to ensure that events conform to plans. Thus, planning without controlling is meaningless.
4) Similarly, controlling is blind without planning. If the standards are not set in advance, managers have nothing to control. When there is no plan, there is no basis of controlling.
5) Planning seeks consistent, integrated and articulated programmes while controlling seeks to compel events to conform plans.
6) Planning is basically an intellectual process involving thinking, articulation and analysis to discover and prescribe an appropriate course of action for achieving objectives. Controlling, on the other hand, checks whether decisions have been translated into desired action. Planning is thus, prescriptive whereas, controlling is evaluative.
7) Planning involves looking ahead and is called forward looking function. Controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backward looking function
8) Planning is guided by past experiences and the corrective action initiated by control function aims to improve future performance. Thus, planning and controlling are both backward-looking as well as a forward-looking function.
- Planning based on facts makes controlling easier and effective
- Controlling improves future planning by providing information derived from past experience.

Question: Explain briefly the steps involved in controlling process.
Answer: Controlling Process:
Controlling is a systematic process involving the following steps.
1. Setting performance standards
2. Measurement of actual performance
3. Comparison of actual performance with standards
4. Analysing deviations
5. Taking corrective actions
1) Setting Performance Standards:
The first step in the controlling process is setting up of performance standards. Standards serve as benchmarks towards which an organisation strives to work. Standards can be set in both quantitative as well as qualitative terms. For instance, standards set in terms of cost to be incurred, revenue to be earned, product units to be produced and sold, time to be spent in performing a task, all represents quantitative standards. standards may also be set in qualitative terms. Improving goodwill and motivation level of employees are examples.
2) Measurement of Actual Performance:
Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance. These include personal observation, sample checking, performance reports, etc. Measurement of performance of an employee may require preparation of performance report by his superior. Efficiency of production may be measured by counting the number of pieces produced and number of detective pieces in a batch.
3) Comparing Actual Performance with Standards:
This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results. Comparison becomes easier when standards are set in quantitative terms.
4) Analysing Deviations:
Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations. Critical point control and management by exception should be used by a manager in this regard.
1. Critical Point Control: It is neither economical nor easy to keep a check on each and every activity in an organisation. Control should, therefore, focus on Key Result Areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organisation suffers.
2. 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. Thus, if the plans lay down 2 per cent increase in labour cost as an acceptable range of deviation in a manufacturing
organisation, only increase in labour cost beyond 2 per cent should be brought to the notice of the management.
5) Taking Corrective Action:
The final step in the controlling process 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. Corrective action might involve training of employees if the production target could not be met or assigning of additional workers or equipment for completion of projects on time.

Question: Explain the limitations of controlling.
Answer: 
(i) Difficulty in setting quantitative standards:
Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. This makes measurement of performance and their comparison with standards a difficult task. Employee morale, job satisfaction and human behaviour are such areas where this problem might arise.
(ii) Little control on external factors:
Generally an enterprise cannot control external factors such as government policies, technological changes, competition etc.
(iii) Resistance from employees:
Control is often resisted by employees. They see it as a restriction on their
freedom. For instance, Employees might object when they are kept under a strict watch with the help of Closed Circuit Televisions (CCTVs).
(iv) Costly affair:
Control is a costly affair as it involves a lot of expenditure, time and effort. A small enterprise cannot afford to install an expensive control system. It cannot justify the expenses involved. Managers must ensure that the costs of installing and operating a control system should not exceed the benefits derived from it.

Practical Oriented Question

Five mark question:

Question: As a manager of an organisation, what are the modern techniques of controlling you would like to adopt?
Answer: Modern techniques of managerial control:
(a) Return on investment
(b) Ratio analysis
(c) Responsibility accounting
(d) Management audit
(e) PERT and CPM (Programme Evaluation Review Technique) (Critical Path Method)
(f) Management Information System

Question. Which of the following is not an importance of controlling function?
(a) It ensures order and discipline.
(b) It restricts co-ordination in action.
(c) It helps in judging accuracy of standards.
(d) It improves employee motivation.

Answer: b

Question. Which of the following statements does not highlight the relationship between planning and controlling?
(a) Planning and controlling are separable twins of management.
(b) Planning without controlling is meaningless, controlling without planning is blind.
(c) Planning is prescriptive, controlling is evaluative.
(d) Planning and controlling are interrelated and interdependent.

Answer: a

Question. Om Prakash has set up a small business unit for the manufacturing of detergent. In order to market the detergent in the local residential areas, he has appointed a team of ten salesmen. Each salesman is expected to sell at least \( 200 \) units of the detergent within a week’s time. Identify the point of importance of controlling being highlighted in the above case.
(a) Controlling helps in judging accuracy of standards.
(b) It ensures efficient use of resources.
(c) It helps in improving employee motivation.
(d) It facilitates co-ordination in action.

Answer: c

Question. It is the process of ensuring that events confirm to plans.
(a) Planning
(b) Controlling
(c) Organising
(d) Directing

Answer: b

Question. The controlling function is performed by
(a) Top level management
(b) Lower level management
(c) Middle level management
(d) All of the above

Answer: d

Question. Controlling function brings the management cycle back to the
(a) Organising function
(b) Directing function
(c) Planning function
(d) None of the above

Answer: c

Question. Deviations are said to be positive in nature when
(a) Planned performance is more than the actual performance
(b) Actual performance is more than the planned performance
(c) Both planned and actual performances are same
(d) None of the above

Answer: b

Question. Which of the following statements is true with respect to controlling function?
(a) It is a forward looking function.
(b) Is a backward looking function.
(c) Both (a) and (b)
(d) None of the above

Answer: c

Question. Identify the correct sequence of the steps involved in the controlling process.
(a) Measurement of actual performance, Taking corrective action, Setting performance standards, Comparison of actual performance with standards, Analysing deviations
(b) Comparison of actual performance with standards, Setting performance standards. Measurement of actual performance, Analysing deviations, Taking corrective action
(c) Setting performance standards, Measurement of actual performance, Comparison of actual performance with standards, Analysing deviations, Taking corrective action
(d) Taking corrective action, Measurement of actual performance, Comparison of actual performance with standards, Analysing deviations, Setting performance standards

Answer: c

Question. Which of the following is a technique used for measuring actual performance?
(a) Random sampling
(b) Personal observation
(c) Performance reports
(d) All of the above

Answer: d

Question. The comparison of actual performance with the planned performance becomes easier if the standards are set in
(a) Qualitative terms
(b) Quantitative terms
(c) Either of the above
(d) None of the above

Answer: b

Question. This concept of Control Management is based on the belief that if you try to control everything, you may end up controlling nothing.
(a) Critical point control
(b) Key result areas
(c) Management by exception
(d) Deviations

Answer: c

Question. When the deviations between the actual performance and the planned performance are within the limits
(a) A limited corrective action is required
(b) No corrective action is required
(c) A major corrective action is required
(d) None of the above

Answer: b

Question. In an artificial plants manufacturing unit, the standard output set for a worker is \( 50 \) units per day. Dinesh produces \( 48 \) units in one day. In the given case, the value of deviation is
(a) -2
(b) + 2
(c) 98
(d) None of the above

Answer: a

Question. The need for the controlling function is felt in
(a) Business organisations
(b) Political organisations
(c) Social organisations
(d) All of the above

Answer: d

Question. Controlling is known as a backward-looking function because
(a) It relates to future course of action.
(b) It is like a post-mortem of the past activities
(c) To find out deviation, it aims at improving future performance.
(d) All of the above

Answer: b

Question. Reducing the workers, absenteeism in a factory by \( 20\% \) is an example of
(a) Quantitative standard
(b) Qualitative standard
(c) Deviation
(d) None of the above

Answer: a

Question. Yash runs a logistic company. The Tour Incharges of each trip in the company are expected to submit a report to the Event Manager on the completion of every trip. Identify the step in the controlling process being described in the above lines.
(a) Setting of standards
(b) Measurement of actual performance
(c) Taking corrective action
(d) Analysing the deviations

Answer: b

Question. In a marketing firm, the Financial Manager pays more attention towards an increase of \( 3\% \) in the marketing cost as compared to a \( 15\% \) increase in the courier expenses. Identify the concept being used by the manager.
(a) Management by exception
(b) Critical point control
(c) Corrective action
(d) None of the above

Answer: b