Class 12 Business Studies Chapter 8 Important Questions – Controlling

Controlling ensures that actual organisational activities conform to planned standards and objectives. These questions cover its importance, limitations, relationship with planning, process and practical applications.

Class 12 Business Studies Chapter 8 Important Questions help students understand how managers track performance and correct deviations. Controlling does not only identify mistakes after work is completed. It also helps managers improve ongoing activities and prepare better future plans.

Students should understand the five steps of controlling in the correct order. They should also learn how critical point control and management by exception help managers focus on significant deviations.

Key Takeaways

• Controlling ensures that actual performance conforms to plans.
• It is a goal-oriented, continuous and pervasive management function.
• Planning provides standards for controlling.
• Controlling provides feedback for future planning.
• The controlling process contains five connected steps.
• Corrective action is required when deviations cross acceptable limits.
• Critical point control focuses on key result areas.
• Management by exception focuses on significant deviations.
• Controlling cannot fully remove the effects of external factors.
• An effective control system should cost less than the benefits it provides.

Important Terms from Controlling

Five Steps in the Controlling Process

1. Setting performance standards
2. Measuring actual performance
3. Comparing actual performance with standards
4. Analysing deviations
5. Taking corrective action

Access Class 12 Business Studies Chapter 8 Important Questions in 30 Minutes

First 10 minutes: Revise the meaning, features, importance and limitations of controlling.

Next 10 minutes: Review the relationship between planning and controlling.

Final 10 minutes: Practise the five-step process, management by exception and case studies.

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Important Questions for Class 12 Business Studies Chapter 8

Q1. What is controlling?

Answer:

Controlling is the process of ensuring that actual organisational activities are performed according to plans.

It involves:

• Establishing performance standards
• Measuring actual performance
• Comparing results with standards
• Identifying deviations
• Taking corrective action

Controlling also ensures that organisational resources are used effectively and efficiently to achieve predetermined goals.

Q2. Explain any four features of controlling.

Answer:

Goal-oriented: Controlling ensures that activities contribute towards organisational objectives.

Pervasive: Managers at top, middle and lower levels perform the controlling function.

Continuous: Performance must be monitored regularly because organisational activities continue over time.

Forward-looking and backward-looking: It analyses past performance but uses the findings to improve future results.

Closely linked with planning: Controlling requires standards established through planning.

Q3. Explain the importance of controlling.

Answer:

Accomplishing organisational goals: Controlling identifies deviations and keeps activities directed towards objectives.

Judging the accuracy of standards: It helps managers determine whether existing standards remain realistic.

Efficient use of resources: It reduces wastage, spoilage and unnecessary costs.

Improving employee motivation: Employees know what performance is expected and how it will be evaluated.

Ensuring order and discipline: Regular monitoring discourages dishonest and careless behaviour.

Facilitating coordination: Standards align the efforts of different employees and departments.

Q4. Explain the limitations of controlling.

Answer:

Difficulty in setting quantitative standards: Employee morale, job satisfaction and human behaviour cannot always be measured numerically.

Little control over external factors: Government policies, technology and competition may affect performance.

Resistance from employees: Workers may consider close supervision a restriction on their freedom.

Costly process: Controlling requires time, money, equipment and trained managers.

A control system is justified only when its benefits exceed its cost.

Q5. Why is controlling called a pervasive function?

Answer:

Controlling is called pervasive because it is performed:

• At every level of management
• In every functional department
• In business and non-business organisations

A top-level manager controls overall organisational performance. A departmental manager controls the activities of a specific department. A supervisor controls the daily work of employees.

Therefore, controlling is required throughout the organisation.

Q6. Explain how controlling helps in the efficient use of resources.

Answer:

Controlling compares actual use of resources with predetermined standards.

It helps managers identify:

• Wastage of materials
• Excessive labour costs
• Idle equipment
• Defective production
• Unnecessary expenditure

Corrective action can then be taken to reduce waste and improve productivity.

As each activity follows established standards, resources are used more effectively and efficiently.

Q7. Explain the relationship between planning and controlling.

Answer:

Planning and controlling are inseparable functions of management.

Planning establishes organisational objectives and performance standards. Controlling measures whether actual results match those standards.

Planning without controlling is meaningless because managers cannot determine whether plans are being implemented.

Controlling without planning is blind because no standards exist for measuring performance.

Controlling also provides feedback about mistakes and changing conditions. This information helps managers prepare more realistic future plans.

Q8. “Planning is looking ahead, while controlling is looking back.” Comment.

Answer:

The statement is only partly correct.

Planning is forward-looking because it sets future objectives and decides future courses of action.

Controlling is backward-looking because it compares actual past performance with predetermined standards.

However, planning also uses past experience when preparing future plans. Controlling is also forward-looking because corrective action improves future performance.

Therefore, both planning and controlling are forward-looking and backward-looking.

Q9. Distinguish between planning and controlling.

Answer:

Although they differ, both functions support and reinforce each other.

Q10. Explain the first step in the controlling process.

Answer:

The first step is setting performance standards.

Standards are benchmarks against which actual performance is measured.

They may be quantitative, such as:

• Cost to be incurred
• Revenue to be earned
• Units to be produced
• Time required for a task
• Number of defective products

They may also be qualitative, such as:

• Employee motivation
• Customer satisfaction
• Organisational goodwill

Standards should be clear, realistic, measurable and flexible.

Q11. How is actual performance measured?

Answer:

Actual performance should be measured objectively and reliably.

Common methods include:

• Personal observation
• Sample checking
• Performance reports
• Financial ratios
• Sales records
• Production reports
• Customer-feedback data

Performance should preferably be measured in the same units used for setting standards.

Where possible, measurement should take place during the activity. This allows managers to prevent defects instead of discovering them only after completion.

Q12. Explain the comparison and deviation-analysis stages of controlling.

Answer:

After actual performance is measured, it is compared with predetermined standards.

This comparison shows whether:

• Performance matches the standard
• Performance exceeds the standard
• Performance falls below the standard

The difference is called a deviation.

Managers then analyse deviations to determine:

• Whether they are within acceptable limits
• Whether they affect a critical area
• What caused them
• Which management level should respond

Possible causes include unrealistic standards, inadequate resources, defective processes and environmental changes.

Q13. What is corrective action? Give suitable examples.

Answer:

Corrective action is the final step in the controlling process.

It is taken when a deviation goes beyond the acceptable range.

Examples include:

• Training employees when productivity is low
• Assigning additional workers to a delayed project
• Permitting overtime to meet deadlines
• Repairing or replacing faulty equipment
• Changing a defective production process
• Revising unrealistic standards

No corrective action may be required when the deviation remains within the acceptable limit.

Q14. Explain critical point control.

Answer:

Critical point control means focusing managerial attention on key result areas that are essential to organisational success.

It is neither practical nor economical to monitor every activity with equal intensity.

For example, a five per cent increase in labour cost may require more attention than a larger percentage increase in postal expenses.

Managers identify critical areas such as:

• Production quality
• Labour cost
• Customer complaints
• Cash flow
• Project deadlines

Any problem in these areas can seriously affect the entire organisation.

Q15. Explain management by exception.

Answer:

Management by exception means that managers should focus mainly on significant deviations that cross predetermined limits.

Routine and minor deviations can be handled by subordinates.

For example, if a two per cent increase in labour cost is acceptable, senior management may review the matter only when the increase exceeds that limit.

Its benefits include:

• Saving managers’ time
• Focusing attention on important problems
• Supporting delegation
• Improving employee morale
• Ensuring timely action on serious deviations

Q16. “An effort to control everything may end up controlling nothing.” Explain.

Answer:

Managers have limited time and cannot examine every activity in equal detail.

Trying to control every minor issue may divert attention from serious problems. Managers may become occupied with routine matters while critical deviations remain unnoticed.

Therefore, they should use:

• Critical point control
• Management by exception

These principles help managers focus on key result areas and significant deviations. Routine issues can be delegated to lower-level managers.

Q17. Explain the five steps involved in the controlling process.

Answer:

Setting performance standards: Managers establish benchmarks for evaluating performance.

Measuring actual performance: Results are measured through observation, reports, sampling and other methods.

Comparing performance with standards: Actual results are matched with the predetermined benchmarks.

Analysing deviations: Managers identify significant deviations and determine their causes.

Taking corrective action: Steps are taken to eliminate the cause and prevent recurrence.

The process also supplies information for improving future plans.

Q18. A company set a monthly production target of 10,000 units. It produced 9,200 units because several machines repeatedly broke down. Identify the controlling steps reflected in the situation and suggest corrective action.

Answer:

The monthly target of 10,000 units represents setting performance standards.

The production of 9,200 units represents measurement of actual performance.

The shortfall of 800 units represents comparison and identification of deviation.

Repeated machine breakdowns represent analysis of the cause of deviation.

Suitable corrective actions include:

• Repairing defective machines
• Introducing preventive maintenance
• Replacing outdated equipment
• Revising the production schedule
• Arranging backup machinery

The company should first correct the equipment problem instead of blaming workers.

Q19. A salesperson falls short of the daily target by a small amount for two days. The manager immediately recommends dismissal. Which principle of controlling should senior management apply?

Answer:

Senior management should apply management by exception.

Managers should not give excessive attention to every minor deviation. They should first determine:

• The permissible range of deviation
• Whether the deviation is significant
• Whether it occurred repeatedly
• The reason for the shortfall
• Whether it affects a critical area

A small shortfall for two days may not justify dismissal. The employee may need guidance, training or temporary support.

Q20. A mobile-phone company is losing sales because competitors offer better technology and pricing. Explain how controlling can help the company.

Answer:

The company should follow the complete controlling process.

Set revised standards: Establish realistic sales, quality, pricing and customer-satisfaction standards.

Measure actual performance: Collect sales data, customer complaints, market-share figures and product-return data.

Compare results: Identify gaps between expected and actual performance.

Analyse deviations: Determine whether the causes include outdated technology, high prices, weak promotion or poor service.

Take corrective action: Improve products, revise prices, train employees, strengthen after-sales service or change marketing plans.

Controlling also helps managers assess whether earlier plans remain suitable in the changed market.

How to Prepare Controlling

Begin with the meaning and importance of controlling. Then learn the five steps in the correct sequence.

Use one example for each step. For instance, a production target can serve as the standard, actual output as performance and the output gap as deviation.

Practise case studies by identifying the exact controlling term before explaining it. Words such as “significant deviation,” “key area,” “acceptable limit” and “corrective measure” provide useful clues.

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