CBSE Class 12 Business Studies Controlling Worksheet Set B

1. Meaning of Controlling:
Controlling means ensuring that all the activities in an organisation are performed as per the plans and the resources are being used effectively and efficiently.
Controlling is a goal oriented function.
Controlling function of a manager is a pervasive function.

2. ‘Controlling should not be misunderstood as a last function of management .’ Why?
It is a function that brings back the management cycle back to the planning function.
Controlling also finds out the deviations between the standard and actual and takes corrective action.it improves planning in the next cycle.

3. Importance of controlling:
i. Accomplishing organizational goals: controlling function guides the organisation by measuring the progress towards the goals and brings light to the deviations.
ii. Judging accuracy of standards: 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 in light of such changes.
iii. Making efficient use of resources : In controlling each activity is performed in accordance with predetermined standards and this helps to reduce the wastage and spoilage of resources.
iv. Improving employee motivation: In a good control system employees know well in advance the expected standards of performance on the basis of which they will be appraised . It motivates them to give better performance.
v. Ensuring Order and Discipline: controlling helps to minimize dishonest behavior on the part of the employees by keeping a close check on their activities.
vi. Facilitating coordination in action: Here each employee and department is governed by predetermined standards which are well coordinated with one another.

How Planning and Controlling are related:

PLANNING                                                                                         CONTROLLING
Standards of performance are provided by planning.                             Control presupposes the existence of certain standards.
Plan is operational                                                                              Control is to monitor the progress measure it and discover the deviations

Planning is the prerequisite of controlling                                             Controlling cannot be possible without planning   

Planning seeks consistent, integrated and articulated programmes.      Controlling seeks compel events to conform to plans.
Planning is an intellectual process                                                       Controlling checks whether decisions have been translated into desired action.

Planning is looking ahead. Because plans are prepared for                  Controlling is looking back. Because it is like a postmortem of past
future and are based on forecasts about future conditions.                  activities to find out deviations from standard. So it is a     

Planning is guided by past experiences and corrective actions initiated by controlling function. So planning and controlling are both backward-looking as well as a forward -looking function.

Controlling Process:

Step 1: Setting Performance Standards: Standards are the criteria against which actual performance would be measured and they serve as the benchmarks towards which an organisation strives to work. Examples for quantitative standards are cost to be incurred, revenue to be earned, time to be spent in performing a task etc. Examples of Qualitative standards are improving goodwill and motivation level of employees. The standards should be flexible enough to be modified whenever required.

Step 2: Measurement of actual performance: The techniques used for measuring the performance includes personal observation, sample checking , performance reports etc. The performance should be measured in the same units in which the standards are set and this makes the comparison easier. Measurement of the work should be done during the performance .
Measurement of performance of an employee may require preparation of performance report bhy supervisor. A company’s performance is measured by using gross profit ratio , net profit ratio, ROI etc.
Sample checking is the checking of quality specifications by checking certain pieces at random.

Step 3: Comparing Actual Performance with Standards: in this step the actual performance is compared with the standard and this will reveal the deviation.

Step 4: Analysing deviations: it is important to find the acceptable range of deviations and deviations in key areas of business. Crtitical point control and Management by exception should be used by the manager in this regard.
i. Critical Point Control: Control should 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 these points the entire organisations suffers.
ii. Management By Exception: it can also be referred to as control by exception.instead of controlling everything only the significant areas which go beyond the permissible limit should be brought to the notice of the management.
After this the exact cause of deviation is to be analysed. Then it is to be reported and corrective action taken at appropriate level.

Step 5 : Taking corrective actions: if the deviations are within the acceptable limits then no corrective action is required. But if it goes beyond the range in important areas then it demands immediate managerial attention .
Corrective action might involve training of employees , in case of projects assigning of additional workers and equipment to the project and allowing overtime work. If the deviations cannot be corrected then the standards may have to be revised.

Question. If you want to control everything you may end up controlling.
Answer: Management By Exception.

Question. Define Management Audit.
Answer: Systematic appraisal of the overall performance of the management of an organization.

Question. Why is controlling considered to be a backward looking?
Answer: Controlling involves evaluation of past activities to find out deviations from standards so it is a backward looking function.

Question. Name two types of profitability ratios?
Answer: a) Gross Profit Ratio
b) Net Profit Ratio.

Question. What do you call the sales volume at which there is no profit, No loss?
Answer: Breakeven Point (BEP).

Question. Give 2 examples of Corrective Action.
Answer:a) Provide training
b) Revive standards.

Question. Give two examples of responsibility centers.
Answer: Cost Centre, revenue center etc.

Question. Marketing department comes under which type of responsibility center.
Answer:Revenue Centre.

Question. Give the formula of Return on Investment.
Answer: Net Profit 
Total investment

Question. What do you understand by key KRAs result areas?
Answer: The areas which are critical to the success of an organization.

Question. Why planning is an empty exercise without controlling? 
Answer: Planning is an empty exercise without controlling because implementation of plans and monitoring of plan depend upon controlling.

Question. Which two steps in the process of controlling are concerned with compelling events to conform to plan?
Answer: a) Comparison of actual performance with standards.
c) Taking corrective actions.

Important Questions for NCERT Class 12 Business Studies Controlling

Question . What type of nature the control has?
(a) Positive Approach
(b) Negative Approach
(c) Both of the above
(d) None of the above

Answer :  C

Question . An efficient control system helps to:
(a) Achieve objectives
(b) boost Employee’s Morale
(c) Efficient use of Resources
(d) All of the above

Answer :  D

Question . An efficient control system helps to
(a) Accomplish organisational objectives
(b) Boost employee morale
(c) Judge accuracy of standards
(d) All of the above

Answer :  D

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

Answer :  C

Question . Standards are set in_
a)qualitative
b)quantitative
c)both a) &b)
d)none

Answer :  C

Question . Which of the following is not a limitation of controlling?
(a) Controlling is pervasive
(b) Controlling restricts employee freedom
(c) Controlling cannot control external factors
(d) Controlling involves huge cost
Answer :  A

Question . Controlling cannot be performed without
(a) Planning
(b) Organising
(c) Directing
(d) Leadership
Answer :  A

Question Effectiveness ofBudgeting depends on 
a)liquidity
b)estimates
c)planning
d)resouces

Answer :  B

Question. Controlling is the function which brings back themanagementcycle to_
a)organizing
b)planning
c)directing
d)management

Answer :  B

Question. Management by exception differentiates between _
a)standards &outputs
b)planned &actual
c)critical &simple problems
d)input &output

Answer :  B

Question .Management audit is a techniqueto keep a check on the performance of________
a)company
b)management
c)shareholders
d)customers

Answer :  A

Question. Budgetory control requires the preparation of _
a)training schedule
b)budgets
c)network diagram
d)responsibility centres

Answer :  B

TRUE/ FALSE

1. Controlling directs the activities and efforts of all towards the accomplishment of organizational goals. True
2. Corrective actions are necessary after analysing the deviations. True
3. Controlling does not facilitate coordination of action. False
4. Judging accuracy is one of the important aspects of controlling. True
5. Resources are used in the most effective and efficient manner while exercising controlling. True
6. Controlling is not able to create an atmosphere of order and discipline. False
7. Controlling is a goal oriented function. True
8 Controlling function of a manager is a pervasive function. True
9. Controlling is not required in an educational institution. False
10. Controlling is a management function that brings the management cycle back to planning function. True
11. The standards of performance which serve as the basis of controlling are provided by planning.True
12. Planning and controlling are both backward looking as well as a forward looking function. True
13. Planning based on facts does not make controlling easier and effective. False
14. Controlling improves future planning by providing information derived from past experience. True
15. Controlling is a primary function of every manager. True
16. A system of control presupposes the existence of certain standards. True

According to Koontz 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.

Meaning of Controlling
Controlling is one of the important functions of a manager, in order to seek planned results from the subordinates.
Controlling means ensuring that activities in an organization which are performed as per the plans. Controlling also ensures that an organization’s resources are being used effectively and efficiently for the achievement of predetermined goals.
Controlling function of a manager is a pervasive function i.e. Managers at all level top, middle and lower-need to perform controlling functions to keep a control over activities in their respective areas. Moreover, controlling is as much required in an educational institution, military, hospital, and a club as in any business organization.
It is a function that brings back the management cycle back to the planning function.
The controlling function finds out how far actual performance deviates from standards, analyses the causes of such deviations and attempts to take corrective actions based on the same.

Importance of Controlling
Control is an indispensable function of management. Without control the best of plans can go awry. A good control system helps an organization in the following ways:

1) Accomplishing organizational goals: Managerial Control implies the measurement of actual performance against the standard and the correction of deviations, to assure attainment of objectives according to plans. It, thus, guides the organization to achieve its goals.
2) 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 organization and in the environment and helps to review and revise the standards in light of such changes.
3) 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.
4) 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.
5)Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organization. It helps to minimize dishonest behaviour on the part of the employees by keeping a close check on their activities.
6) Facilitating coordination in action: Controlling provides direction to the activities of all departments by coordinating them with one another

Relationship between Planning and Controlling

1. Planning and Control are closely related to each other. They are the two sides of a single coin and they cannot be separated. The relationship between these two is discussed below :-

(a) Both Planning and Controlling are interrelated and inter-dependent.
(i) Controlling is blind without Planning:-Without Planning, there is no basis for controlling, as we have to compare actual performance with planned performance. So planning is essential to perform controlling function.

(ii) Planning without Controlling is useless:-The controlling function is performed to see that commitments under the plan are fulfilled or not. Controlling helps in adaption of new plans and revision of existing plans on the basis of comparison of actual performance against standards.
(iii) So it is rightly said that planning and controlling are inter linked and inter related , as planning gets its importance only with controlling function, and controlling ends and starts with new plans.

(b) Both Planning and Controlling are forward looking functions and backward looking functions:-
(i) Planning is forward looking , Controlling is backward looking:-Planning is looking ahead as plans are prepared for the future and are based on forecasts about future conditions. On the other hand controlling is backward looking function as it measures and compares actual performance with standards fixed in the past.
(ii) Planning is backward looking function, controlling is forward looking function:-Planning is backward looking function because plans are guided by the past experiences. Controlling is forward looking because it aims to improve future performances based on experiences gained in the past.
(iii) So Planning and Controlling both are forward looking as well as backward looking function.

(c) Planning is Prescriptive and Controlling is evaluative.
(i) Planning is Prescriptive process as it prescribed the most appropriate alternative course of action to achieve the objectives.
(ii) On the other hand controlling is an evaluative process as it evaluates whether the plans have been translated into desired action. So, controlling starts where planning ends.

It is often said that planning is looking ahead while controlling is looking back. However, the statement is only partially correct. Plans are prepared for future and are based on forecasts about future conditions. Therefore, planning involves looking ahead and is called a forward-looking function. On the contrary, controlling is like a postmortem of past activities to find out deviations from the standards. In that sense, controlling is a backward-looking function. However, it should be understood that planning is guided by past experiences and the corrective action initiated by control function aims to improve future performance.

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. Analyzing deviations
5. Taking corrective action

Step 1: Setting Performance Standards: The first step in the controlling process is setting up of performance standards. Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organization strives to work.
Standards can be set in both quantitative as well as qualitative terms. Improving goodwill and motivation level of employees are examples of qualitative standards.

Step 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, ratio analysis etc. As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier. It is generally believed that measurement should be done after the task is completed. However, wherever possible, measurement of work should be done during the performance.

Step 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. For instance, performance of a worker in terms of units produced in a week can be easily measured against the standard output for the week.

Step 4: Analyzing Deviations: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations. Also, deviations in key areas of business need to be attended more urgently as compared to deviations in certain significant areas. 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 organization. Control should, therefore, focus on key result areas (KRAs) which are critical to the success of an organization. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organization suffers. For instance, in a manufacturing organization, an increase of 5 per cent in the labour cost may be more troublesome than a 15 per cent increase in postal charges.

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 the management. E.g. – in any electronics company 2% of daily production can be defective (within acceptable limit). If the defect is more than 2%, the deviation should be brought to the notice of the management.

Step 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. Similarly, if an important project is running behind schedule, corrective action might involve assigning of additional workers and equipment to the project and permission for overtime work.

Advantages of Critical Point Control and Management by Exception
When a manager sets critical points and focuses attention on significant deviations which cross the permissible limit, the following advantages accrue:
1. It saves the time and efforts of managers as they deal with only significant deviations.
2. It focuses managerial attention on important areas. Thus, there is better utilization of managerial talent.
3. The routine problems are left to the subordinates. Management by exception, thus, facilitates delegation of authority and increases morale of the employees.
4. It identifies critical problems which need timely action to keep the organization in right track.

Some examples of Corrective Action:
1. Defective material Change the quality specification for the material used
2. Defective machinery Repair the existing machine or replace the machine if it cannot be repaired
3. Obsolete machinery Undertake technological up gradation of machinery
4. Defective process Modify the existing process
5. Defective physical conditions of work improve the physical conditions of work

Important Questions for NCERT Class 12 Business Studies Controlling 

Question  Controlling function of organization is____
(a) forwardlooking
(b) forward as well as backward looking
(c) backward looking
(d) none

Answer :  B

Question  Critical point control focuses on _
(a) every task
(b) financial areas
(c) key result area
(d) planning areas

Answer :  C

Question .Measurement of employees’ performance can be done by ______________.
(a) Increasing the market share of the company
(b) Gross profit ratio
(c) Return on investment
(d) Performance report

Answer :  D

Question .Management by Exception refers to ________________
(a) Significant deviation which goes beyond the permissible limit should be brought to the notice of the management.
(b) Focuses on the key result areas.
(c) Comparison of actual performance with the standard.
(d) Measurement of Company’s and its employees’ performance.

Answer :  A

Question . Chief basis of standards is ________ .
(a) Quantity
(b) Quality
(c) Time
(d) All the above

Answer :  D

Question . ________ standard is associated with production.
(a) Quality
(b) Quantity
(c) Quality and Quantity
(d) Labour

Answer :  C

Question .Standards can be set in the following terms:
(a) Only Qualitative
(b) Only Quantitative
(c) Both Qualitative and Quantitative
(d) Neither Qualitative nor Quantitative

Answer :  C

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

Answer :  B

Question . Controlling starts where
(a) Planning ends
(b) Organising ends
(c) Directing ends
(d) Staffing ends

Answer :  A

Question .This is one of the features of standards. Identify it.
(a) Rigid
(b) Flexible
(c) Static
(d) Unbending

Answer :  B

Question .Which one of the following is not the step in the process of controlling?
(a) Measurement of actual performance.
(b) Establishing reporting relationship.
(c) Setting performance standards.
(d) Taking corrective action.

Answer :  B

Question .Among the following, which one standard can be maintained in Marketing?(App)
(a) Cost
(b) Flow of Capital
(c) Advertising Expenditure
(d) Liquidity.

Answer :  C

Question. “Controlling improves future planning by providing information derived from past experience. “This, controlling function of an organisation based on given feature is.
(a) Forward looking
(b) Backward looking
(c) Forward as well as backward looking
(d) None of the above.

Answer :  C

Question. “Employees might object when they are kept under a strict watch with the help of CCTVS.” Which Limitation of controlling is indicated here’
(a) Control through CCTVS is as costly affair
(b) Organisation have little control on external factors.
(c) Selection of CCTVS instalation points is difficult and time consuming.
(d) Resistance from employees.

Answer :  D

Question. After identifying the deviations that demand managerial attention these deviations need to be ............. for their causes.
(a) Studied
(b) ignored
(c) analysed
(d) interpreted

Answer :  C

Question. Corrective action might involve ............ of employees if the production target could not be met.
(a) Counselling
(b) Inducement
(c) Influencing
(d) Training

Answer :  D

Question. Which function of managment bring back the manangement cycle back to the planning function.
(a) Directing
(b) Organising
(c) Controlling
(d) Staffing

Answer :  C

Question. Identify the basis of controlling that are provided by planning.
(a) Actual performance
(b) Key Result areas
(c) order and discipline
(d) Standard performance

Answer :  D

Question. The plans lay down 2% increase in labour cost as an acceptable range of deviation in a manufacturing organisation, only increase in labour cost beyond 2% Should be brought to the notice of the management.
Which method of controlling deviations is mentional above.
(a) Budgetary control
(b) Critical point control
(c) Management by exception
(d) Inventory control.

Answer :  C

Question. A good control system helpls an organisatioin to.
(a) Accomplishes organisational gools.
(b) Judges accuracy of standerds.
(c) Ensure order and discipline
(d) All of the above.

Answer :  D

Question. Planning and controlling are inseparable .............. of managment.
(a) Functions
(b) Activities
(c) Twins
(d) Processes

Answer :  C

Question. In case the deviation cannot be corrected through managerial action, what should be done.
(a) Standards may have to be revised.
(b) Control through CCTVS should be ensured
(c) Existing controlling process should be changed/modified
(d) Sample checking should be done.

Answer :  A

Question. Which function of management not only helps in keeping a track on the progress of activities but also ensures that activities conform to the standards set in advance.
(a) Planning
(b) Directing
(c) organising
(d) controlling

Answer :  D

Question. Controlling creates an atmosphere of ............ and ........... .
(a) order, discipline
(b) order, clarity
(c) order, happiness
(d) order, peace

Answer :  A

Question. In a manufacturing organisation an increase of 5% in the labour cost may be more troublesome than a 15% increase in postal charges.
Which method of controlling Deviations is mentioned in above example.
(a) Budgetary control
(b) Management by exception
(c) Critical point control
(d) Inventory control

Answer :  C

Question. Under which step of controlling process certain pieces are checked at random for quality as sample checking.
(a) Measurement of actual performance
(b) Comparing actual performance with standards
(c) Analysing Deviations
(d) Taking corrective action.

Answer :  A

Question. ............... checks whether decisions have been translated into desired action due to which it is evaluative in nature.
(a) Planning
(b) Controlling
(c) Directing
(d) Organising

Answer :  B

True/False :

Question. Controlling process is evaluative in nature as it checks whether decisions have been translated into desired action.

Answer : True

Question. Once a plan becomes operational, controlling is not neccessary as events will conform to plans automatically.

Answer : False

Question. Critical point control is an important principle of managment control based on the belief that an attempt to control everything results in controlling nothing.

Answer : False

Question. Planning and controlling reinforce each other as planning improves future by providing information derived from past experiences while controlling based on facts makes planning easier.

Answer : False

Question. Sometime situation may arise when deviation cannot be corrected through managerial action then in such situations the standards may have to be revised . 

Answer : True

Question. On which function of management is controlling dependent? 
Answer: planning

Question. In controlling, why is actual performance is compared with standards? 
Answer: It is compared to find out the deviation between actual and desired results.

Question. Standards are set in quantitative as well as in qualitative terms, identify the type of standards when it is set in terms of ‘cost to be incurred’?
Answer: Quantitative standards

Question. Give the meaning of ‘deviation ‘used in control function of management? 
Answer: It means the difference between standard performance and actual performance.

Question. When is a corrective action required in controlling? 
Answer: When deviations go beyond the acceptable range, especially in the key results areas the immediate corrective action is required in controlling.

Question. What should be done while ‘taking corrective actions’ in the process of controlling when especially in the important areas deviation go beyond the acceptable range?
Answer: It demands immediate managerial attention.

Question. Planning is looking ahead and controlling is looking back. Comment. 
Answer:
1. Planning is looking ahead as plans are prepared for future and are based on forecasts about future conditions. While controlling is looking back as it measures and compares actual performance with standard performance.
2. However, planning is also looking back as plans are formulated in the light of the problems that were identified in the past.

Question. Explain how controlling is an indispensable tool of management to attain the objectives?
Answer: Controlling is an indispensable tool as :
1. Helps in attaining organizational goals
2. Judging accuracy of standards
3. Motivates employees & improves their moral
4. Promotes Discipline & order

Question. Suggest the corrective actions to be taken for the following causes of deviation.
i) Defective material
ii) Defective machinery
iii) Obsolete machinery
iv) Defective Process
v) Defective physical conditions of work
Answer: i) Change the quality specification for the material used.
ii) Repair the existing machine or replace the machine if it cannot be repaired.
iii) Undertake technological up gradation of machinery
iv) Modify the existing process
v) Improve the physical conditions of work.

Question. “In the absence of of a managerial function, planning goes unchecked “Name the function and explain its importance.
Answer: (i) Accomplishing organizational goals: The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action.
(ii) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective.
(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.
(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 behaviour on the part of the employees by keeping a close check on their activities.