NCERT Solutions Class 12 Business Studies Chapter 8 Controlling

NCERT Solutions Class 12 Business Studies Chapter 8 Controlling

NCERT Solutions Class 12 Business Studies Chapter 8 Controlling: National Council of Educational Research and Training (NCERT) Class 12 Business Studies Chapter 8 Solutions – Controlling.

Board	NCERT
Class	12
Subject	Business Studies
Chapter	8
Chapter Name	Controlling
Topic	Exercise Solutions

Very Short Answer Questions:

1.) State the meaning of controlling.

Ans- Controlling means ensuring that activities in an organisation are performed as per the plans.

2.) Name the principle that a manager should consider while dealing with deviations effectively. State any one situation in which an organisation’s control system loses its effectiveness.

Ans- The principle that a manager should consider while dealing with deviations effectively is Controlling. An organisation’s Control system loses its effectiveness in case of a dynamic business environment like – Change in demand of a product due to change n customer’s preferences.

3.) State any one situation in which an organisation’s control system loses is effectiveness.

Ans- An organisation’s Control system loses its effectiveness in case of a dynamic business environment like – Change in demand of a product due to change n customer’s preferences.

4.) Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.

Ans- Two standards used by a company to evaluate the performance of its Finance & Accounting department are – Flow of Capital , Liquidity.

5.) Which term is used to indicate the difference between standard performance and actual performance?

Ans – The term used to indicate the difference between standard performance and actual performance is “deviations in performance “.

Short Answer Type

1.) ‘Planning is looking ahead and controlling is looking back.’ Comment.

Ans – Planning and controlling are inseparable twins of management. Planning initiates the process of management and controlling completes the process. Plans are the basis of control and without the best laid plans may go astray. 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.

Thus, planning and controlling are both backward-looking as well as a forward-looking function.

2.) ‘An effort to control everything may end up in controlling nothing.’ Explain.

Ans – The above statement can be explained with the help of the concept –“Management by Exception”

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 beyond the control of the organisation. It is necessary to identify the exact causes of deviations, failing which, an appropriate corrective action might not be possible. The deviations and their causes are then reported and corrective action taken at appropriate level.

3.) Explain how management audit serves as an effective technique of controlling.

Ans- Management audit is an effective controlling technique as it provides the following advantages  to organisations:

i.) It helps to locate the present and potential deficiencies in the performance of management functions.

ii) It helps to improve the controlling system of an organisation by continuously monitoring the performances.

iii)It ensures updating of existing managerial policies related to environmental changes.

iv) It improves coordination in the functioning of various departments of the organisation.

4.) Mr.Arfaaz had been heading the production department of Writewell Products Ltd., a firm manufacturing stationary items. The firm secured an export order that had to be completed on a priority basis and productiontargets were defined for all the employees. One of the workers, Mr.Bhanu Prasad, fell short of his daily production target by 10 units for two days consecutively. Mr.Arfaaz approached MsVasundhara, the CEO of the Company, to file a complaint against Mr Bhanu Prasad and requested her to terminate his services. Explain the principle of management control that Ms Vasundhara should consider while taking her decision.

Ans – The principle of Management control adopted by Ms Vasundhara is Management By Exception which is explained below:

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 beyond the control of the organisation.

It is necessary to identify the exact causes of deviations, failing which, an appropriate corrective action might not be possible. The deviations and their causes are then reported and corrective action taken at appropriate level.

Long Answer Type

1.) Explain the various steps involved in the process of control.

Ans- The various steps involved in the process of Controlling are as follows:

i) 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 organisation strives to work.

ii) 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.

iii) 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.

iv) Analysing Deviations: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations.

v) 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.

2.) Explain the techniques of managerial control.

Ans – The techniques of managerial control are as follows:

Traditional Techniques:

i) Personal Observations: It enables the manager to collect first hand information and creates a psychological pressure on employees to perform better.

ii) Statistical Reports : Statistical analysis in the form of averages , percentages, ratios helps the managers to present useful information regarding the performance of employees.

iii) Budgetary Control :In this technique of controlling , all the operations are planned in advance in the form of budget and actual results are compared with budgetary standards.

Modern Techniques:

i) Return On Investment : It is a useful technique which provides the basic yardstick for measuring effectively the return on investment .This helps to measure the overall performance of various departments in the organisations.

ROI = Net Income / Sales

ii)Management Audit : This refers to systematic appraisal of overall performance of management that helps in identifying the deficiencies in performances.

3.) Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?

Ans – The importance of Controlling in an organisation are as follows:

i) Accomplishing organisational goals: The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organization 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.

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.

The problems faced by the organisation in implementing an effective control system are as follows:

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) 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.

4.) Discuss the relationship between planning and controlling.

Ans – The relationship between planning and controlling is explained as follows:

Planning and controlling are inseparable twins of management. Planning initiates the process of management and controlling completes the process. Plans are the basis of control and without the best laid plans may go astray. 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.

Thus, planning and controlling are both backward-looking as well as a forward-looking function.

5.) . A company ‘M’ limited is manufacturing mobile phones both for domestic Indian market as well as for export. It had enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing.

a.) Identify the benefits the company will derive from a good control system.

b.) How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained.

c.) Give the steps in the control process that the company should follow to remove the problems it is facing

Ans- a) The benefits derived from a good controlling system for M Limited are as follows:

i) Accomplishing organisational goals: The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organization 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.

b.) The company can relate its planning with control in this line of business to ensure that its plans are actually implemented and targets are attained in the following ways:

i) 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 organisation strives to work.

ii) 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.

c.) The steps in the control process that the company should follow to remove the problems it is facing are as follows:

i) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective.

ii) 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.

iii) 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.

6.) Mr Shantanu is a chief manager of a reputed company that manufactures garments. He called the production manager and instructed him to keep a constant and continuous check on all the activities related to his department so that everything goes as per the set plan. He also suggested him to keep a track of the performance of all the employees in the organisation so that targets are achieved effectively and efficiently.

a.) Describe any two features of Controlling highlighted in the above situation.

b.) Explain any four points of importance of Controlling.

Ans – a)Any two features of Controlling highlighted in the above situation are as follows:

i) Goal Oriented Process: Controlling involves setting of some goals or standards on the basis of which the present situation or performance of the organisation can be measured.

ii ) Continuous Process: Controlling is a continuous process as the managers needs to continuously monitor the performance of the organisation .

b) Four points of importance of Controlling are as follows:

i) Accomplishing organisational goals: The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organization 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.

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.

In case you missed: Previous Chapter No. 7 Question Answer