CBSE Sample Papers for Class 12 Business Studies Paper 1

CBSE Sample Papers for Class 12 Business Studies Paper 1 are part of CBSE Sample Papers for Class 12 Business Studies Here we have given CBSE Sample Papers for Class 12 Business Studies Paper 1.

CBSE Sample Papers for Class 12 Business Studies Paper 1

Students who are going to appear for CBSE Class 12 Examinations are advised to practice the CBSE sample papers given here which is designed as per the latest Syllabus and marking scheme, as prescribed by the CBSE, is given here. Paper 1 of Solved CBSE Sample Papers for Class 12 Business Studies is given below with free PDF download solutions.

Time: 3 Hours
Maximum Marks: 80

General Instructions

(i) Answer to questions carrying 1 mark may be from one word to one sentence.
(ii) Answer to questions carrying 3 marks may have about 50 to 75 words.
(iii) Answer to questions carrying 4 – 5 marks may have about 150 words.
(iv) Answer to questions carrying 6 marks may have about 200 words.
(v) Attempt all the parts of a question together.

Questions

Question 1:
Define ‘Decentralisation’.

Question 2:
Give the meaning of ‘Method’ as a type of plan.

Question 3:
Saurabh decided to start a chocolates manufacturing business. He set the target of earning 10% profit on sales in the first year. As a good businessman, he was concerned about the future of the business, which was uncertain. He gathered information that the demand for chocolates is increasing day-by-day. He used this information as the base for future planning and shared it with his team. On the basis of the gathered information, he scheduled a meeting in the following week to find innovative ways to achieve the objectives.
List the first two steps, which have been followed by Saurabh that are related to the process of one of the functions of management.

Question 4:
In the paint industry, various raw materials are mixed in different proportions with petroleum for manufacturing different kinds of paints. One specific raw material is not readily and regularly available to the paint manufacturing companies. Bonier Paints Company is also facing this problem and because of this there is a time lag between placing the order and the actual receipt of the material. But, once it receives the raw materials, it takes less time in converting it into finished goods.
Identify the factor affecting the working capital requirements of this industry.

Question 5:
An investor wanted to invest ₹20,000 in Treasury Bills for a period of 91 days. When he approached the Reserve Bank of India for this purpose he came to know that it was not possible. Identify the reason why the investor could not invest in the Treasury Bill.

Question 6:
Why is the understanding of ‘Marketing Management Philosophies’ important ?

Question 7:
Give the constitution of the District Consumer Disputes Redressal Forum under the Consumer Protection Act, 1986.

Question 8:
‘Buy one get one free’ is printed on the label of the package of a mosquito repellant. State the labelling function being performed by this statement.

Question 9:
Differentiate between formal and informal organisations on the basis of
(i) origin,
(ii) authority, and
(iii) flow of communication.

Question 10:
State the steps in the selection procedure, after the employment interview and before the job offer.

Question 11:
Sandhya is a successful manager at Manisons Enterprises. She has a team of twelve people working under her. She encourages them to set their own objectives and take decisions. She respects their opinions and supports them, so that they can perform their duties and accomplish organisational objectives. To manage and exercise effective control she uses forces within the group.
As an intelligent manager, at times, she also makes use of positive aspects of informal communication. This way, she is able to unify diverse interests and ensure that targets are met.

1. There are many theories and styles of influencing people’s behaviour. Identify the style used by Sandhya which is based on the use of authority.
2. State two positive aspects of the communication discussed above, which Sandhya is using as an intelligent manager.

Question 12:
The Return on Investment (ROI) of a company ranges between 10-12% for the past three years. To finance its future fixed capital needs, it has the following options for borrowing debt:
Option ‘A’: Rate of interest 9%
Option ‘B’: Rate of interest 13%
Which source of debt, ‘Option A’ or ‘Option B’, is better ? Give reason in support of your answer. Also state the concept being used in taking the decision.

Question 13:
Explain briefly any two points of importance of consumer protection from the point of view of business.

Question 14:
Aradhana and Gandharv are heads of two different departments in ‘Yumco Ltd.’ They are efficient managers and are able to motivate the employees of their respective departments to improve performance. However, their drive to excel in their own sphere of activity instead of giving emphasis on objectives of the enterprise has hindered the interaction between the departments that Aradhana and Gandharv are heading. Often there are inter-departmental conflicts and they have become incompatible. This has proved to be harmful in the fulfilment of the organisational objectives. The situation has deteriorated to such an extent that the CEO of ‘Yumco Ltd/ has hired a consultant, Rashmi, to resolve the problem. After studying the situation closely, Rashmi found that the problem has arisen due to inflexibility and a narrow perspective on the part of both Aradhana and Gandharv. She is of the view that this situation is a result of the type of organisational structure ‘Yumco Ltd/ has adopted.
From the above information, identify the organisational structure adopted by ‘Yumco Ltd.’ and state any three advantages of the structure so identified.

Question 15:
In 2015, Naveen left his luxurious life in Mumbai, where he worked as a manager for Blue Birds Ltd. He shifted to Begampur, Chhattisgarh to fulfil his grandmother’s dream of converting their 25 – acre ancestral land into a fertile farm. For this he set out specific goals along with the activities to be performed to achieve the goals.
Every activity was a challenge since he was clueless about farming. He learnt every activity from filling the land to sowing the seeds. To aid farmers he launched his own company ‘Innovative Agriculture Solutions Pvt. Ltd’.
It was difficult initially as no one trusted an urban youth telling farmers about fanning. But when everything was discussed in detail the fanners started taking interest. He wanted to ensure that the future events meet effectively the best interests of the company. Through sales forecasting, he prepared an annual plan for production and sales.
He also found that the farmers grew only paddy, which was an activity of 3-4 months and the land remained idle for the rest 8-9 months of the year. He not only identified but evaluated various alternatives through which the farms could be utilised for the remaining months of the year. Through correct foresight and logical and systematic thinking based on analysis of all facts, all alternatives were examined and evaluated. He presented a plan to the fanners, where after harvesting paddy, vegetables could be grown.
The above case highlights the features of one of the functions of management. By quoting lines from the above identify and explain these features.

Question 16:
Explain any four points of importance of the controlling function of management.

Question 17:
Ram Murthy, the CEO of ‘Goodcare Hospitals’, a leading chain of hospitals, decided to reward the good work of the doctors of his organisation. For this he instituted two running trophies. A ‘Healthcare Achievers Trophy’ to acknowledge and appreciate the tireless efforts of the doctors who rendered selfless services to the patients and another ‘Beti Bachao Trophy’ to recognise the outstanding work done by the doctors in saving the girl child.
The CEO also wanted to improve the health services in rural areas all over the country. He decided that all doctors must work in rural areas for at least six months. He also decided that the paramedical staff should be employed locally.

1.  Identify the incentive provided by ‘Goodcare Hospitals’ to its doctors through running trophies.
2.  Which need of the doctors will be satisfied through the incentive; identified in part (a) ? State.
3. State any two types of human needs suggested by Maslow for motivation.

Question 18:
State the protective functions of Securities and Exchange Board of India.

Question 19:
Sumit purchased an ISI marked washing machine of a famous brand ‘MG’ from TG Electronics Ltd. The shopkeeper asked him to wait for two days for installation of the machine. His friend, Vivek, was very fond of experimenting with new electronic products. He told Sumit that there is no need to wait for the company’s representative to install the machine and that he could do it. So, both of them installed the machine without following the manufacturer’s instructions. Initially, the machine worked effectively and the wash was good. But after two days, the machine started stopping in between the wash cycle. Sumit and Vivek tried their best to start the machine but failed in their efforts. Sumit, therefore, approached TG Electronics Ltd., which refused to provide any service on the plea that the installation of the machine was not done by the company.
State the responsibility which Sumit had to fulfil as an, aware consumer to get the services of the company.
Explain briefly any two rights which Sumit could have exercised had he fulfilled his responsibility identified in part (a).

Question 20:
What is meant by coordination ? State its any four features.

Question 21:
‘Konark Ltd.’ is an electronic goods manufacturing enterprise situated in Shivpuri, Madhya Pradesh. It is earning a very low revenue in comparison to a competing electronic goods manufacturing enterprise, ‘Nova Ltd.’situated in Mumbai. Both Konark’s and Nova’s operations are affected directly by the investors, customers, competitors and suppliers, which are unique to their respective locations. In addition to this, individual firms of this field are affected indirectly by the factors like the money supply in the economy, composition of the families, the technological changes, etc.

1. Identify and state the feature of the concept discussed in the above paragraph.
2. Also, state any four points of importance of this concept.

Question 22:
After acquiring the necessary knowledge and skills on starting an Aloevera Farm, Ashok wanted to be the leading manufacturer of Aloevera products worldwide. He observed that the products were expensive as the demand of the products was more than the supply. He was also keen to promote methods and practices that were economically viable, environmentally sound and at the same time protecting public health.
Ashok’s main consideration was about the amount of money paid by the consumers in consideration of the purchase of Aloevera products. He also thought that competitors prices and their anticipated reactions must also be considered for this.
After gathering and analysing information and doing correct marketing planning, he came to know that the consumers compare the value of a product to the value of money which they are required to pay. The consumers will be ready to buy a product when they perceived that the value of the product is at least equal to the value of money which they would pay.
Since he was entering into a new market, he felt that he may not be able to cover all costs. He knew that in the long run the business will not be able to survive unless all costs are covered in addition to a mininum profit.
He examined the quality and features of the products of the competitors and the anticipated reactions of the consumers. Considering the same he decided to add some unique features to the packaging and also decided to provide free home delivery of the products.
The above case relates to a concept which is considered to be an effective competitive marketing weapon. In conditions of perfect competition most of the firms compete with each other on this concept in the marketing of goods and services.

1. Identify the concept.
2. Explain briefly any four factors discussed in the above case related to the concept so identified.

Question 23:
Karan Nath took over ‘D’north Motor Company7 from his ailing father three months ago. In the past the company was not performing well. Karan was determined to improve the company’s performance. He observed that the methods of production, as well as selection of employees in the company, were not scientific.
He believed that there was only one best method to maximise efficiency. He also felt that once the method is developed, the workers of the company should be trained to learn that ‘best method’.
He asked the Production Manager to develop the best method and cany out the necessary training. The Production Manager developed this method using several parameters right from deciding the sequence of operations, place for men, machines and raw materials till the delivery of the product to the customers. This method was implemented throughout the organisation. It helped in increasing the output, improving the quality and reducing the cost and wastage.
Identify and explain the principles and the technique of scientific management followed by the Production Manager in the above case.

Question 24:
‘Moga Industries Ltd.’ approached a well established university in the city of Madurai to recruit qualified personnel for various technical and professional jobs. They selected Tanya, Ritu, Garima and Chetan for various vacancies in the organisation.
After the selection and placement, ‘Moga Industries Ltd.’ felt the need to increase the skills and abilities, and the development of positive attitude of the employees to perform their specific jobs better. The company also realised that learning new skills would improve the job performance of the employees. Hence, the company decided to take action for the same.

1. Name the step of the staffing process regarding which the company decided to take action.
2. State the benefits of the action to ‘Moga Industries Ltd.’

Question 25:
Explain briefly any four factors affecting the fixed capital requirements of an organisation.

Answers

Answer 1:
Decentralisation refers to systematic delegation of authority through all the levels of management and in all the departments.

Answer 2:
Method, as a type of plan, refers to the prescribed way or manner in which a task has to be performed.

Answer 3:
Following are the two steps followed by Saurabh :

• Setting objectives.
• Developing premises.

Answer 4:
Following factors affect the working capital requirements :

1. Availability of raw materials.
2. Production cycle.
3. Nature of business.

Answer 5:
The investor could not invest in the Treasury Bills because treasury bills can be issued for a minimum amount of ₹25,000 and its multiples thereof.

Answer 6:
Understanding of “Marketing Management” is important because it gives an idea about the marketing strategy to be followed by the organisation.

Answer 7:
District Consumer Disputes Redressal Forum consists of a President and two members appointed by the state government. One of the members should be a woman.

Answer 8:
The labelling function being performed by given statement is promotion of sales by inducing the people to purchase the product.

Answer 9:
Difference between formal and informal organisations :

Answer 10:
Following are the steps in the selection procedure, after the employment interview and before the job offer :

1. Reference and background checks – Most of the employers seek from the candidates references, which may be previous employers, known persons, teachers etc. Employers request references to give detailed information about candidate’s capabilities.
2. Selection decision – The final decision has to be made from among the candidates who pass the tests, interviews and reference checks.
3. Medical examination – The next step in the selection process is medical examination to verify medical fitness of the candidate for the job to be assigned to him.

Answer 11:

1. Democratic style is being used by Sandhya.
2. Following are the positive aspects of the communication used by Sandhya :
   • Faster communication – Informal communication carries messages at a fast pace.
   • Two-way communication – Informal communication facilitates interchange of ideas. A manager is in a position to know the reaction of his subordinates.

Answer 12:
Option “A” is better because in this option return on investment is higher than the rate of interest. As a result, company is in a position to earn profit due to presence of debt.
The concept being used is “Trading on Equity.” Trading on equity refers to the use of fixed cost sources of finance i.e., debt in the capital structure so as to increase the return on equity shares.

Answer 13:
Following points explain the importance of consumer protection in India :

1.  long-term interest of business – It is in the long-term interest of the business to satisfy their customers. After liberalisation and globalisation, it is in the interest of the firm to produce quality goods and maintain its reputation. Satisfied consumers ensure long-term profit-maximisation.
2.  Consumer awareness – Now-a-days, consumers are becoming more conscious of their rights against the malpractices by the business. There are many consumer organisations which are iftaking efforts to build consumer awareness.
3. Social responsibility – A business has social responsibilities towards various groups. Consumers form an important group among the many stakeholders of business. Hence, business has to take care of interests of consumers.

Answer 14:
The organisational structure adopted by Yumco Ltd. is a Functional Structure.
Following are the advantages of functional structure of organisation :

1. Coordination – Functional structure of organisation facilitates coordination of activities at intra-departmental and inter-departmental levels. Top executives coordinate the activities at inter-departmental level whereas heads of respective departments coordinate the activities within the departments.
2. Effective control – Functional structure of organisation recognises each major function as a separate department, which ensures occupational specialisation. Functional structure enables top-executives to exercise effective control over a limited number of functions.
3. Training – Functional structure makes training of employees easier because the focus of training is only on limited range of skills.
4. Lower cost – Functional structure leads to minimal duplication of efforts which result in economies of scale. This lowers cost of organisation.

Answer 15:
The given case highlights the features of “Planning”.
Following are the features of planning as highlighted by given case :

(i) Planning is related to achieving objectives – Planning focuses on achieving objectives. Planning involves setting of specific objectives and determining the techniques to achieve them.
Line given:
“He set out specific goals along with the activities to be performed to achieve the goals.”

(ii) Planning is futuristic – Planning is forward looking. Planning involves anticipating the future course of events. Planning is based on forecasting i.e., assessing the future events.
Line given:
“He wanted to ensure that the future events meet effectively the best interests of the company.”
Or
“Through sales forecasting, he prepared an annual plan for production and sales.”

(iii) Planning involves decision-making – Planning involves choosing among alternatives to achieve a particular objective. A manager has to choose only one alternative which is best suited to the enterprise.
Line given:
“He not only identified but evaluated various alternatives through which the farms could be utilised for the remaining months of the year.”
Or
” all alternatives were examined and evaluated.”

(iv) Planning is a mental exercise – Planning requires application of mind involving foresightedness, intelligent imagination and judgment. The quality of planning varies according to quality of mind of the manager.
Line given:
“Through correct foresight and logical and systematic thinking based on analysis of all facts

Answer 16:
Following points highlight the importance of controlling function of management:

1.  Accomplishing organisational goals – Controlling ensures that results of business operations conform as closely as possible to the predetermined objectives. Controlling tries to correct the deviation between actual results and desired results.
2.  Judging accuracy of standards – A control system enables management to verify whether standards are objective. Standards need to be revised in the light of changes in environment.
3. Making efficient use of resources – Controlling reduces wastage of resources. Since activities are performed in accordance with standards, resources are used in efficient manner.
4. Improving employee motivation – The existence of control system has a positive impact on the behaviour of the employees. Employees know well in advance what are the standards of performance. It motivates them to improve their performance.
5. Ensuring order and discipline – Controlling creates an atmosphere of order and discipline in the organisation. Controlling minimises the dishonest behaviour on the part of the employees.

Answer 17:

1. Employee recognition, a non-financial incentive.
2. Esteem or ego needs – These needs are needs for self-esteem and need for other esteem. Self-esteem needs include needs for self-respect, self-confidence, competence, autonomy and knowledge. Other esteem needs relate to reputation, prestige, power, status, recognition and respect of others. These needs stand fourth in the hierarchy of five needs suggested by Maslow.
3. (i) Safety/Security Needs
   (ii) Affiliation/Belonging Needs
   (ii) Physiological Needs
   (iv) Self actualisation Needs.

Answer 18:
Following are the protective functions of Securities and Exchange Board of India SEBI:

1. Check on unfair practices – SEBI prevents fraudulent and unfair trade practices in the interest
   of investors. Some of the usual unfair trade practices are making misleading advertisements, manipulations, price rigging etc. SEBI takes strong actions against the companies indulging in these unfair trade practices.
2. Control on insider trading – When a person having access to price sensitive information in respect of securities of a company uses the information to make his personal profit, it is called insider trading. SEBI keeps a strict check on insider trading and takes strict action.
3. Protection of investors – SEBI protects the rights and interests of investors particularly individual investors and to guide and educate them. SEBI has compelled the companies to give accurate information to the investors on regular basis.
4. Code of conduct – SEBI promotes fair trade practices by developing a code of conduct so that companies and financial intermediaries render better service to the investors.

Answer 19:

1. As an aware consumer, Sumit has to fulfil the responsibility of following manufacturer’s instructions and use the products safely.
2. Following are the rights which Sumit could have exercised had he fulfilled his responsibility:
   • Right to be heard – Right to be heard means that consumers should have the right to express their views, ideas and reactions about the product. The companies must have complaint cells to attend consumer’s complaints. There should be appropriate consumer forums where consumers should have an opportunity to lodge their complaints. This will enable them to obtain redress of their grievances. Consumer Protection Act, 1986 provides for the establishment of Consumer Disputes Redressal Agencies to enable the consumers to resolve their disputes in a fair and expeditious manner.
   • Right to seek redressal – A consumer has the right to seek redressal and receive compensation against any exploitation and unfair trade practices. He can seek redressal and receive monetary compensation or repair of defect in the good or replacement of good. Government has set up various redressal forums at different levels.

Answer 20:
Coordination may be defined as a process of synchronisation of different activities and efforts of the various units of an organisation so that the planned objectives may be achieved with minimum conflict.

Following are the features of coordination :

1. Integration – Coordination is a process of integrating group efforts. Coordination unifies unrelated or diverse interests into purposeful work activity. Coordination comes into picture where groups of persons are involved in working.
2. Unity of action – Every individual perceives the organisation goals differently. Coordination results in reconciliation of goals by securing unity of action in the pursuit of common purpose.
   Coordination is a binding force between departments.
3. Continuous process – Coordination is not a one-time affair but a continuous process. It begins at the planning and continues till controlling.
4. Pervasive function – Coordination is required at all levels of management due to interdependent nature of activities of various departments. Coordination integrates the efforts of different departments.
5. Deliberate function – Coordination is a deliberate function. A manager has to coordinate the efforts of different people in a deliberate manner.
6. Responsibility of all managers – Coordination is the function of every manager in the organisation. Coordination is required at all levels of management.

Answer 21:

1. The concept discussed in the given paragraph is Business Environment which consists
   of specific and general forces.
   Business Environment includes both specific and general forces. Specific forces affect individual enterprises directly and immediately in their day-to-day working. General forces have impact on all business enterprises and thus may affect an individual firm only indirectly.
2. Following points highlight the importance of business environment for a business enterprises :
   • First mover advantage – Environment provides numerous opportunities to a firm understanding environment, helps a firm to identify the opportunity and to be the first to exploit it to its advantage. It gives an edge to the firm over its competitors. For example, Maruti Udyog became the leader in the small car market because it was first to identify the preference of middle class population in the context of rising fuel cost.
   •  Warning signal – A change in environment may be the source of many threats to a firm. A firm can anticipate the impact of such a change and prepare itself to meet such threat by adopting various measures. For example, if a firm finds that a new firm is entering into the market, it can meet such a threat by improving the quality of the product or engaging in aggressive advertising.
   • Tapping useful resources – Environment is a source of various resources for running a business. A business enterprise designs policies to get its inputs like raw-materials, machines, finance, labour, etc. from the environment. It uses such inputs and produces goods and services desired by the customers and then, supplies the output to the environment.
   • Coping with changes – In order to effectively cope with rapid changes in technology, fashion and government policies, managers should understand the environment.

Answer 22:

1. The given case relates to “Pricing” as a component of marketing mix.
2. Following factors related to pricing have been discussed :
   • Product cost – The product cost sets the minimum level or the floor price at which the product may be sold. As far as possible, price of the product should cover his cost and a reasonable profit. However, in case of a new product or new market, price may be fixed below cost.
   • Utility and demand – Utility provided by the product and the intensity of the demand of the buyer sets the upper limit of the price. A consumer will not pay price more than the utility of the product. When demand of the product is inelastic, the firm can charge higher price.
   • Competition – Competitors’ prices and their anticipated reactions must be considered before fixing the price of the product. In case of intense competition the firm will keep the price low.
   • Objectives – Pricing policy of a firm is influenced by the objectives of setting the price. The objectives may be to capture a large market share, to increase profits, to increase sales or to survive only. For example, if the objective is to maximise sales or have a bigger market share, a low price will be fixed.

Answer 23:
Following are the principles of scientific management followed by the Production Manager in the given case

1.  Science, not rule of thumb – Taylor believed that there was one best method of maximising efficiency. This method could be developed through study and analysis. The method so developed should substitute the “Rule of Thumb” through the organisation. Scientific method involves investigation of traditional methods through work study, unifying the best practices and develop¬ing a standard method which would follow throughout the organisation. This can result in tremendous saving of time and materials.
2. Development of efficiency and prosperity – Scientific management requires development of each and every person to his greatest efficiency and prosperity. Scientific management emphasises the need for training to workers. Each person should be scientifically selected and should be given required training. This will ensure their greatest efficiency and prosperity for both company and workers.

Following is the technique of scientific management followed by the Production Manager in the given case:
Method study – Method study means a technique which involves the critical examination of plant layout, product design, material handling and work process. Method study is related to methods of performing of a job. The purpose of method study is to keep the production costs to the minimum by a proper mixture of resources. Method study finds out the best way of doing the job. Method study includes all activities from procurement of raw materials till the final product is delivered to the customer.

Answer 24:

1. Training and development is the step of the staffing process regarding which the
   company decided to take action.
2. Training and development offers following benefits to Moga Industries Ltd :
   • Lesser cost of production – Training and development reduces cost of production in the sense that trained employees will be able to make much better and economical use of material and machines than untrained employees.
   • Higher profits – Training and development makes the employees more efficient and the productivity of employees increases which leads to higher revenue and lower costs. In this way training ensures higher profits.
   • Employee development – Training and development makes the employees aware of new, improved and advanced knowledge and skills. This enables them to take more challenging jobs and to take position of future managers in case of emergency.
   • Adaptation – Now-a-days, rapid changes are taking place in economic and technological environment of the business. Training and development keeps the employees in touch with latest changes and developments.
   • Lesser employee turnover – Training and development creates a feeling among the employees that they are being properly cared for. This increases employee morale and reduces employees’ turnover.

Answer 25:
Following are the factors that affect the fixed capital requirements of a company :

1. Nature of business – A trading concern needs lower fixed capital since it does not require to purchase plant and machinery etc. A manufacturing concern would require heavy investment in fixed assets to purchase plant and machinery etc.
2. Growth prospects – If an organisation expects higher growth prospects, it will require higher investment in fixed assets to create higher capacity of production.
3. Diversification – More fixed capital will be required in case of companies which have diversity of production lines as compared to companies which do not have much of diversification.
4. Level of collaboration – If some business organisations share each other’s facilities, these organisations will require lesser fixed capital. If there is no collaboration, an organisation will require more fixed capital to rim its business smoothly.
5. Technology upgradation – Some assets such as computers become obsolete faster and are replaced much sooner than other fixed assets say furniture.
   Thus, such organisations which use assets which are prone to obsolescence require higher fixed capital to purchase such assets.

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