Chapter controlling: Controlling Application Questions | business studies Class 12 CBSE

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Chapter controlling: Controlling Application Questions | business studies Class 12 CBSE | ByteNotes.in

Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 1

Applied Concept

Riya is the production manager at a garments factory. She notices that the number of defective pieces has increased from 5 per 1,000 to 12 per 1,000 over the last month. Identify which step of the controlling process she is at and explain what she should do next.

Riya is at Step 3 — Comparing Actual Performance with Standards. The standard was 5 defective pieces per 1,000, and the actual performance is 12 defective pieces per 1,000, revealing a significant deviation of 7 extra defectives per 1,000 units.
Since this deviation is significant, she should move to Step 4 — Analysing Deviations — and investigate the causes using Critical Point Control, as quality is a Key Result Area in production. Possible causes include machine malfunction, untrained workers or use of substandard raw material.
After identifying the exact cause, she must proceed to Step 5 — Taking Corrective Action — which could involve machine servicing, worker training or switching suppliers. If the standard itself is found to be unrealistic, it may need to be revised.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 2

Applied Concept

Ankit, the CEO of a mid-sized IT firm, tells his team leads to report to him only those issues that are significantly beyond acceptable performance limits. What principle of managerial control is Ankit applying and what are its advantages?

Ankit is applying the principle of Management by Exception, which holds that only significant deviations that go beyond the permissible limit should be brought to the notice of management; routine minor deviations are handled by subordinates.
This saves Ankit's managerial time and effort, allowing him to focus on critical issues that need senior-level attention rather than getting involved in every routine problem.
Additionally, it facilitates delegation of authority — team leads handle minor issues independently — increasing their morale, confidence and sense of responsibility, while ensuring that major organisational crises receive prompt, focused management attention.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 3

Applied Concept

A large textile company has set qualitative standards such as 'improving customer satisfaction' and 'enhancing employee goodwill'. The management is finding it difficult to control performance in these areas. Explain why and how this problem can be addressed.

The problem arises because qualitative standards are difficult to measure and compare with actual performance, which is one of the key limitations of controlling. Unlike quantitative standards (units produced, revenue earned), intangible standards like goodwill and satisfaction cannot be directly counted.
The chapter recommends defining qualitative standards in a way that makes their measurement easier. For customer satisfaction, the company could measure average time taken by a customer to wait, place an order and receive service — converting a qualitative goal into measurable time-based indicators.
For employee goodwill, metrics such as employee turnover rate, absenteeism rate or results of periodic employee satisfaction surveys can serve as proxies for measurement, enabling the company to track changes over time and take corrective action when results fall below acceptable levels.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 4

Applied Concept

Sunita runs a small handicraft business with 10 employees. She is considering installing a sophisticated digital control system that will cost ₹5 lakh per year to maintain. Advise Sunita, citing the relevant limitation of controlling.

Sunita is facing the limitation of controlling related to it being a costly affair. The chapter states that the costs of installing and operating a control system should not exceed the benefits derived from it.
For a small enterprise with only 10 employees, a ₹5 lakh annual control system cost is likely disproportionate to the scale of operations and potential benefits. The investment would be difficult to justify financially.
Sunita should instead consider simpler and less expensive traditional control techniques such as personal observation (she can directly supervise 10 employees) and basic budgetary control, which would be cost-effective and adequate for a business of her size without burdening her financially.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 5

Applied Concept

With reference to the relationship between planning and controlling, explain why a newly launched startup that operates without any formal plans will find it impossible to exercise effective control.

Planning provides the standards and targets against which actual performance is measured in controlling. Without formal plans, there are no predetermined standards — and without standards, managers have nothing to compare actual performance against.
Controlling is blind without planning. The startup would have no basis to identify whether its performance is satisfactory, unsatisfactory or excellent because there is no yardstick for comparison.
Additionally, without plans, corrective actions cannot be meaningfully directed because there is no agreed-upon goal toward which corrections should steer the organisation. The startup will eventually face uncontrolled resource wastage, missed opportunities and organisational confusion, all of which could be avoided with even basic planning that enables a rudimentary control system.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 6

Applied Concept

A manufacturing company's sales manager exceeded the advertising budget by 25% but achieved 40% higher sales than targeted. The production manager is asking the CEO to penalise the sales manager for exceeding the budget. What principle should the CEO apply, and what should be the decision?

The CEO should apply the principle of Management by Exception, which focuses on significant deviations. However, the CEO must consider that the deviation (exceeding advertising budget by 25%) has resulted in a significantly favourable outcome — a 40% increase in sales over target.
Not all deviations are unfavourable — some are positive and should be recognised rather than penalised. Automatically penalising the sales manager without considering the positive result would be an incorrect application of the control process and would demotivate a high-performing employee.
The CEO should acknowledge the achievement in sales, review whether the advertising overspend was necessary to achieve the outcome, and discuss with the sales manager how to plan more accurately for advertising budgets in future — using this as an opportunity to revise the budgetary standard rather than apply a blanket penalty.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 7

Applied Concept

An import-export company suspected two employees of financial fraud. They used computer monitoring software to secretly log keystrokes and confirm the suspicion. Relate this to controlling and identify which importance of controlling is demonstrated here.

This scenario directly illustrates the importance of controlling in ensuring order and discipline. The company's control system — in the form of computer monitoring — helped identify dishonest behaviour by employees who were deleting orders from books after processing them, pocketing revenues.
The control system acted as a check on employee misconduct, demonstrating that controlling helps minimise dishonest behaviour by keeping a close watch on employee activities.
The example also illustrates the importance of making efficient use of resources — the fraud involved embezzlement of $3 million over two and a half years, which was a significant drain on the company's revenue. The timely use of monitoring as a control mechanism prevented further losses and enabled legal action, showing how an effective control system protects organisational resources.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 8

Applied Concept

Rahul is an HR manager who has been asked to set performance standards for the HR department. With reference to the chapter, suggest what standards he could use.

According to the chapter, for the Human Resource Management department, standards can be set in terms of labour relations — the quality of relationship between management and employees, measured by the frequency of disputes or grievance cases.
Labour turnover rate is another standard — measuring the percentage of employees who leave the organisation over a given period compared to a predetermined acceptable rate.
Labour absenteeism rate is a third measurable standard — tracking the percentage of working days lost due to employee absence and comparing it with an acceptable benchmark. These quantitative HR standards make performance evaluation objective and enable Rahul to identify problem areas and implement targeted corrective actions.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 9

Applied Concept

A software company is undertaking a large and complex project to develop a new enterprise application. The project has multiple interdependent activities with uncertain time estimates. Which modern control technique should the company use and why?

The company should use PERT (Programme Evaluation and Review Technique), a modern network-based control technique specifically designed for complex projects where activity time estimates are uncertain or probabilistic — which matches the company's situation.
PERT maps all project activities and their interdependencies, helping the company identify which activities are on the critical path (any delay in these will delay the entire project) and which have slack time that can be used flexibly.
Using PERT, project managers can proactively monitor progress, identify potential bottlenecks early and reallocate resources to critical activities to keep the project on schedule, reducing the risk of cost overruns and deadline failures in this complex software development initiative.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 10

Applied Concept

Priya, the CFO of a large retail chain, wants to evaluate the financial performance of 10 different store locations and compare them against each other. Which modern controlling technique should she use and how will it help?

Priya should use Ratio Analysis, a modern control technique that involves interpreting financial data through various ratios such as profitability ratios (gross profit ratio, net profit ratio), liquidity ratios and activity ratios (inventory turnover).
By calculating and comparing these ratios across all 10 store locations, Priya can objectively assess which stores are performing well and which are lagging — enabling data-driven decisions about resource reallocation, expansion or closure.
Additionally, she could use Return on Investment (ROI) to measure which stores are generating the best returns relative to the capital invested in them, helping the retail chain prioritise investments and identify underperforming stores that require corrective action or operational improvement.

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Chapter sections

Chapter controlling: Controlling | Application Questions

Riya is the production manager at a garments factory. She notices that the number of defective pieces has increased from 5 per 1,000 to 12 per 1,000 over the last month. Identify which step of the controlling process she is at and explain what she should do next.

Ankit, the CEO of a mid-sized IT firm, tells his team leads to report to him only those issues that are significantly beyond acceptable performance limits. What principle of managerial control is Ankit applying and what are its advantages?

A large textile company has set qualitative standards such as 'improving customer satisfaction' and 'enhancing employee goodwill'. The management is finding it difficult to control performance in these areas. Explain why and how this problem can be addressed.

Sunita runs a small handicraft business with 10 employees. She is considering installing a sophisticated digital control system that will cost ₹5 lakh per year to maintain. Advise Sunita, citing the relevant limitation of controlling.

With reference to the relationship between planning and controlling, explain why a newly launched startup that operates without any formal plans will find it impossible to exercise effective control.

A manufacturing company's sales manager exceeded the advertising budget by 25% but achieved 40% higher sales than targeted. The production manager is asking the CEO to penalise the sales manager for exceeding the budget. What principle should the CEO apply, and what should be the decision?

An import-export company suspected two employees of financial fraud. They used computer monitoring software to secretly log keystrokes and confirm the suspicion. Relate this to controlling and identify which importance of controlling is demonstrated here.

Rahul is an HR manager who has been asked to set performance standards for the HR department. With reference to the chapter, suggest what standards he could use.

A software company is undertaking a large and complex project to develop a new enterprise application. The project has multiple interdependent activities with uncertain time estimates. Which modern control technique should the company use and why?

Priya, the CFO of a large retail chain, wants to evaluate the financial performance of 10 different store locations and compare them against each other. Which modern controlling technique should she use and how will it help?

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