This MCQ module is based on: Numericals, End-of-Book Exercises & Case Studies
TOPIC 24 OF 24
Numericals, End-of-Book Exercises & Case Studies
🎓 Class 12
Social Science
CBSE
Theory
Chapter 8 — Controlling
⏱ ~30 min
🌐 Language: [gtranslate]
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8.9 Worked Numericals — Breakeven Analysis
Let us put the breakeven formula to work with the standard NCERT-style numerical that every Class 12 student must master.
📐 Worked Example 1 — NCERT Standard Breakeven Problem
Problem: A firm sells a product at ₹40 per unit. The variable cost per unit is ₹20, and the firm's total fixed costs are ₹40,000. Calculate (a) the contribution margin per unit, (b) the breakeven point in units, and (c) the breakeven point in sales value (₹).
Step 1 — Contribution margin per unit
= Selling Price per unit − Variable Cost per unit
= ₹40 − ₹20 = ₹20
= Selling Price per unit − Variable Cost per unit
= ₹40 − ₹20 = ₹20
Step 2 — Breakeven Point (in units)
= Fixed Cost ÷ Contribution Margin per unit
= ₹40,000 ÷ ₹20 = 2,000 units
= Fixed Cost ÷ Contribution Margin per unit
= ₹40,000 ÷ ₹20 = 2,000 units
Step 3 — Breakeven Point (in ₹)
= BEP units × Selling Price per unit
= 2,000 × ₹40 = ₹80,000
= BEP units × Selling Price per unit
= 2,000 × ₹40 = ₹80,000
📌 Interpretation
At sales of 2,000 units (or ₹80,000) the firm earns no profit and incurs no loss — this is the breakeven point. For every unit sold beyond 2,000, the firm earns ₹20 profit. For every unit short of 2,000, the firm incurs a ₹20 loss. A control system that monitors actual sales against this BEP standard will instantly flag whether the firm is in profit or loss territory each month.
Visualising the BEP — Costs & Sales Curves
📌 Margin of Safety
If actual sales = 3,000 units, then margin of safety = 3,000 − 2,000 = 1,000 units, or 33.3% above BEP. Margin of safety is a standard control benchmark — the larger the margin of safety, the safer the firm against a sales-fall.
📐 Worked Example 2 — Comparative ROI Across Two Firms
Problem: Compare the controlling efficiency of two firms in the same industry using ROI.
| Firm | Net Income (₹ lakh) | Investment (₹ lakh) | ROI |
|---|---|---|---|
| Alpha Ltd | 120 | 800 | 120 ÷ 800 × 100 = 15% |
| Beta Ltd | 90 | 500 | 90 ÷ 500 × 100 = 18% |
Interpretation: Alpha earns higher absolute profit (₹120 lakh) but Beta earns higher return per rupee invested (18% vs 15%). For management control, ROI is the better yardstick — it normalises across firm size. Alpha's management should investigate why a larger investment is yielding a relatively smaller return.
8.10 Conclusion — Closing the Management Loop
Controlling completes the management cycle. As the airline DCS opening case showed, controlling is not a back-office activity — it is the real-time engine that ensures plans actually translate into performance. NCERT establishes four enduring lessons:
- Controlling is goal-oriented & pervasive — performed by every manager at every level, in every kind of organisation.
- Controlling and planning are inseparable twins — plans set the standards; controlling ensures conformance; the two reinforce each other in a closed loop.
- The five-step process is universal — set standards, measure, compare, analyse deviations (using CPC + MBE), take corrective action.
- Techniques range from old to new — but every technique has a purpose: BEP for cost-volume control, budgetary control for departmental discipline, ROI and ratio analysis for profitability control, responsibility accounting for accountability, management audit for systemic appraisal, PERT/CPM for project control, and MIS for real-time information.
For the management student, the chapter offers a final synthesis: strategy without execution is wishful thinking, and execution without controlling is unmanaged drift. Controlling is the quiet, persistent function that closes the gap between intention and result.
Chapter Summary
Meaning
Controlling is the process of ensuring actual activities conform to planned activities — measurement against standard plus correction of deviations.
Importance
Six benefits: accomplishing goals, judging accuracy of standards, efficient resource use, motivation, order & discipline, coordination.
Limitations
Difficulty in setting quantitative standards, little control over external factors, employee resistance, costly affair.
Twin Relationship
"Planning without controlling is meaningless; controlling without planning is blind." Two functions, one loop.
5-Step Process
Set standards → measure performance → compare → analyse deviations (CPC + MBE) → corrective action.
Techniques
Traditional (observation, statistical reports, BEP, budgetary control) + Modern (ROI, ratios, responsibility accounting, management audit, PERT/CPM, MIS).
Key Terms (NCERT)
Controlling
Process of ensuring activities conform to plans.
Critical Point Control
Focus on Key Result Areas critical to organisational success.
Management by Exception
Escalate only significant deviations; routine to subordinates.
Breakeven Analysis
Cost-volume-profit analysis to find no-profit-no-loss point.
Budgetary Control
Use of departmental budgets as standards for control.
Return on Investment
Net income as a percentage of total investment.
Ratio Analysis
Liquidity, solvency, profitability, turnover ratios for control.
Responsibility Accounting
Cost / revenue / profit / investment centres with target accountability.
Management Audit
Systematic appraisal of management performance.
PERT & CPM
Network techniques for project planning and control.
MIS
Computer-based system for management decision-support.
8.11 NCERT Exercises with Model Answers
📝 Very Short Answer Type (VSA)
Q1. State the meaning of controlling.
Answer: Controlling is the management process of ensuring that actual activities in an organisation conform to the plans set in advance. It involves measuring accomplishment against the standard and correcting deviations to assure attainment of objectives — a goal-oriented, pervasive function performed by every manager.
Q2. Name the principle that a manager should consider while dealing with deviations effectively.
Answer: The principle is Management by Exception (also called control by exception). It says that only significant deviations beyond the permissible limit should be brought to the notice of management — routine matters are left to subordinates. The complementary principle is Critical Point Control, which focuses attention on Key Result Areas critical to organisational success.
Q3. State any one situation in which an organisation's control system loses its effectiveness.
Answer: A control system loses some of its effectiveness when standards cannot be defined in quantitative terms. Areas like employee morale, job satisfaction and human behaviour are notoriously difficult to measure precisely, making comparison against standards a difficult task. (Other valid answers: little control over external factors like government policy or competition; employee resistance to perceived surveillance; costs of the control system exceeding its benefits.)
Q4. Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.
Answer: Two standards (NCERT functional-area table) are: (i) Capital expenditures — actual versus budgeted capex; and (ii) Liquidity — current ratio or quick ratio against benchmark. Other valid answers include Inventories (turnover ratio) and Flow of capital (working-capital ratio).
Q5. Which term is used to indicate the difference between standard performance and actual performance?
Answer: The term is Deviation. Deviation = Actual Performance − Standard Performance. It can be positive (above standard), negative (below standard) or zero (on track). Deviations beyond the acceptable range trigger corrective action.
📝 Short Answer Type (SA)
Q1. "Planning is looking ahead and controlling is looking back." Comment.
Answer: The statement is only partially correct. It is true that planning is forward-looking — based on forecasts of future conditions — and controlling is backward-looking — like a "post-mortem" of past activities to find deviations from standards. However, planning is itself guided by past experience (past performance feeds into next year's plan), and the corrective action triggered by control aims to improve future performance. So both functions are simultaneously backward- and forward-looking. Together they reinforce each other: "planning without controlling is meaningless, controlling without planning is blind."
Q2. "An effort to control everything may end up in controlling nothing." Explain.
Answer: This is the foundational principle of Management by Exception. If a manager attempts to scrutinise every activity and every minor deviation, he loses focus on what really matters — and the organisation suffers. Only significant deviations beyond the permissible limit should be brought to management's notice. Routine deviations should be handled by subordinates. This (a) saves managerial time, (b) focuses attention on important areas, (c) facilitates delegation, and (d) increases employee morale. The complementary principle of Critical Point Control reinforces this by focusing controls only on Key Result Areas critical to organisational success.
Q3. Explain how management audit serves as an effective technique of controlling.
Answer: Management Audit is a systematic appraisal of the overall performance of the management of an organisation. It serves as an effective technique of controlling because: (i) it helps to locate present and potential deficiencies in the performance of management functions; (ii) it helps to improve the control system of the organisation by identifying weak points; (iii) it ensures that managerial policies and strategies are updated in light of environmental changes; and (iv) it improves coordination among different functional areas through better managerial alignment. Unlike a financial audit which checks accounts, a management audit examines decisions, structures and processes — making it strategic in scope and perfect for periodic top-management control.
Q4. Mr. Arfaaz heads the production department of Writewell Products Ltd. The firm secured a priority export order with strict production targets. Mr. Bhanu Prasad, a worker, fell short of his daily production target by 10 units for two consecutive days. Mr. Arfaaz approached Ms. Vasundhara, the CEO, to file a complaint and asked her to terminate Bhanu Prasad's services. Explain the principle of management control that Ms. Vasundhara should consider while taking her decision.
Answer (Hint: Management by Exception): Ms. Vasundhara should apply the principle of Management by Exception. The principle holds that "an attempt to control everything results in controlling nothing" — only deviations beyond the permissible limit deserve management attention. A two-day shortfall of 10 units is a minor, routine deviation: Mr. Arfaaz, as production head, should handle it himself through coaching, retraining, or temporary support — not escalate it for termination. Ms. Vasundhara should also apply Critical Point Control: her time is best spent on Key Result Areas (overall export deadline, quality, customer satisfaction), not on a single worker's two-day variance. Termination is disproportionate; it would also lower employee morale and contradict NCERT's importance benefit of "improving employee motivation". The correct response is to delegate the matter to Mr. Arfaaz, ask him to determine the cause (fatigue? machine? family issue?) and take proportionate corrective action.
📝 Long Answer Type (LA)
Q1. Explain the various steps involved in the process of control.
Answer: Controlling is a systematic five-step process. (1) Setting Performance Standards — standards are the criteria against which actual performance is measured. They can be quantitative (cost, revenue, units, time) or qualitative (goodwill, motivation). Standards should be precise, measurable and flexible. (2) Measurement of Actual Performance — performance is measured objectively using personal observation, sample checking, or performance reports. Measurement should ideally use the same units as the standards, and should be done during the task wherever possible (e.g., checking each part before assembling). (3) Comparing Actual Performance with Standards — this reveals the deviation. Comparison is easier when standards are quantitative. (4) Analysing Deviations — managers determine the acceptable range. They use Critical Point Control (focus on KRAs) and Management by Exception (only significant deviations escalated). They identify causes: unrealistic standards, defective processes, inadequate resources, structural drawbacks, organisational constraints, environmental factors. (5) Taking Corrective Action — when deviations exceed acceptable limits, the manager takes action: training, additional resources, overtime, replacing machinery, or revising the standard itself. Every step feeds into the next, and the final corrective action loops back into improved planning for the next cycle.
Q2. Explain the techniques of managerial control.
Answer: Techniques of managerial control are divided into traditional and modern. Traditional Techniques: (i) Personal Observation — direct first-hand monitoring at the workplace; expensive in management time but captures tacit signals. (ii) Statistical Reports — averages, percentages, ratios, charts and graphs that present performance data trend-wise. (iii) Breakeven Analysis — studies cost-volume-profit relationship; BEP (units) = Fixed Cost ÷ (Selling Price − Variable Cost). (iv) Budgetary Control — different budgets (sales, production, cash, master, capital, material, labour) are prepared in advance and actuals compared against them. Modern Techniques: (i) Return on Investment (ROI) = Net Income ÷ Investment × 100 — a basic yardstick for capital efficiency. (ii) Ratio Analysis — liquidity, solvency, profitability, turnover ratios. (iii) Responsibility Accounting — sets up cost, revenue, profit, and investment centres with target accountability. (iv) Management Audit — systematic appraisal of management performance to locate deficiencies. (v) PERT & CPM — network techniques for project control by tracking the critical path. (vi) Management Information System (MIS) — computer-based decision-support that supplies the right information at the right time. Together, these techniques cover financial, operational, project and information control.
Q3. Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?
Answer: Importance (six NCERT benefits): (i) Accomplishing organisational goals — measures progress, surfaces deviations, guides corrective action. (ii) Judging accuracy of standards — verifies whether standards remain accurate and triggers their revision. (iii) Efficient use of resources — reduces wastage and spoilage by enforcing predetermined norms. (iv) Improving employee motivation — clarity of expected performance + appraisal basis motivates employees. (v) Ensuring order and discipline — close check on activities minimises dishonest behaviour (NCERT cites the CDS computer-monitoring case where a $3 million embezzlement was detected). (vi) Facilitating coordination in action — well-coordinated departmental standards align all efforts toward overall goals. Problems / Limitations: (i) Difficulty in setting quantitative standards — morale, satisfaction, behaviour are hard to measure. (ii) Little control over external factors — government policy, competition, technology cannot be controlled internally. (iii) Resistance from employees — workers see control as restriction; CCTV monitoring may attract objections. (iv) Costly affair — installation and operation cost; small enterprises often can't justify it. NCERT therefore advises a cost-benefit test: control benefits must exceed control costs.
Q4. Discuss the relationship between planning and controlling.
Answer: Planning and controlling are inseparable twins of management. (1) Mutual dependence: A system of control presupposes the existence of standards — and these are provided by planning. Once a plan becomes operational, controlling is needed to monitor progress, measure performance, discover deviations and trigger corrective measures. Therefore "planning without controlling is meaningless, and controlling without planning is blind." (2) Different natures: Planning is prescriptive — an intellectual process involving thinking, articulation and analysis to discover the best course of action. Controlling is evaluative — checking whether decisions have been translated into desired action. (3) Both backward and forward-looking: Planning is forward-looking (forecasts future conditions) but is also guided by past experience. Controlling is backward-looking (post-mortem of past activities) but the corrective action it triggers improves future performance. (4) Reinforcement: Planning based on facts makes controlling easier; controlling improves future planning by feeding back information from past experience. The two functions form one continuous loop: plan → execute → control → re-plan → execute → control. Without each other, neither can function effectively.
Q5. Company "M" Limited manufactures mobile phones for both domestic and export markets. It enjoyed substantial market share and a loyal customer base, but lately has been missing its sales and customer-satisfaction targets. The Indian mobile market has grown tremendously and new players have arrived with better technology and pricing. The company plans to revamp its controlling system. (a) Identify the benefits of a good control system. (b) How can the company relate planning with controlling to ensure plans are implemented? (c) Give the steps in the control process the company should follow.
Answer: (a) Benefits of a good control system: (i) accomplishing organisational goals (sales, customer satisfaction); (ii) judging accuracy of standards (sales target may itself be outdated given new competition); (iii) efficient use of resources (no wastage in marketing spend); (iv) improving employee motivation (clarity of revised targets); (v) ensuring order and discipline; (vi) facilitating coordination among R&D, production, marketing and after-sales. (b) Linking planning with controlling: The company should treat them as inseparable twins. Planning will set new standards (revised sales target, target customer-satisfaction score, target market-share); controlling will monitor actuals against those standards and feed deviations back into the next plan cycle. The standard-revision in light of new competitors is itself a controlling output that improves future planning. (c) Five-step control process: (1) Set new standards — units to be sold, gross-profit ratio, customer-satisfaction score (e.g., NPS ≥ 60), service-response time. (2) Measure actual performance — through dealer reports, MIS dashboards, customer surveys. (3) Compare actual vs standard — variance reports for each KRA. (4) Analyse deviations — apply CPC (focus on technology and pricing — the two areas where new players are stronger) and MBE (escalate only deviations beyond a 5% tolerance band). Identify causes: outdated technology, uncompetitive pricing, slow after-sales. (5) Take corrective action — invest in R&D, revise pricing, train service-staff, run targeted marketing; if any standard is found unrealistic, revise it.
Q6. Mr. Shantanu, chief manager of a garment-manufacturing company, instructed the production manager to keep a constant and continuous check on all activities of his department so that everything goes per plan. He also asked him to track every employee's performance to achieve targets effectively and efficiently. (a) Describe any two features of controlling highlighted in the situation. (b) Explain any four points of importance of controlling.
Answer: (a) Two features of controlling highlighted: (i) Goal-Oriented — Mr. Shantanu's instruction to ensure that "targets are achieved effectively and efficiently" is the very definition of controlling as a goal-oriented function. (ii) Continuous Process — the words "constant and continuous check" indicate that controlling is not a one-time activity but runs throughout the life of the organisation. (Alternative valid feature: Pervasive — the production manager controls his department; the chief manager controls the production manager; controlling happens at every level.) (b) Four points of importance: (1) Accomplishing organisational goals — measures progress, surfaces deviations, guides corrective action. (2) Judging accuracy of standards — verifies that the production targets remain realistic; revises them when needed. (3) Improving employee motivation — every worker knows the standard against which he'll be appraised, motivating better effort. (4) Facilitating coordination in action — coordinated standards align production, quality, despatch, and HR with the overall garment-export goal. (Other valid points: efficient resource use; order and discipline.)
📝 Case-Study / Application Questions
Case 1. An airline introduces a Departure Control System (DCS) that automates check-in, baggage handling and load-control. Within months, late-departures fall by 40% and mis-routed baggage by 60%. Identify the NCERT benefits of controlling that the DCS demonstrates.
Answer: The DCS demonstrates at least four NCERT benefits of controlling: (i) Accomplishing organisational goals — on-time departures and zero mis-routing are core airline goals; (ii) Efficient use of resources — reduced fuel waste from balanced loads, less rework on misrouted baggage; (iii) Coordination in action — the DCS integrates check-in, baggage, load-control and immigration; (iv) Order and discipline — automated "no-fly" checks enforce regulatory discipline. Additionally, real-time PNR tracking enables judging accuracy of standards — the airline can revise standards as needed.
Case 2. A small Indian start-up cannot afford an enterprise ERP system but wants to introduce control. List four practical steps it should take, anchoring each to NCERT theory.
Answer: (1) Use cloud-SaaS tools at low monthly cost — addresses NCERT's "costly affair" limitation. (2) Set both quantitative (revenue, defect rate) and qualitative (customer NPS) standards — applies Step 1 of the controlling process. (3) Apply Critical Point Control — focus on cash burn, customer churn, and product quality (the three KRAs of an early-stage start-up). (4) Use Management by Exception — escalate only deviations beyond a 10% tolerance band; let founders focus on growth, not micromanagement. The plan honours NCERT limits while still implementing the five-step process.
Case 3. A firm has fixed costs of ₹1,00,000, sells its product at ₹50, and has a variable cost of ₹30 per unit. (a) Calculate the breakeven point in units and in rupees. (b) If the firm wants to earn a profit of ₹40,000, how many units must it sell?
Answer: (a) Contribution margin per unit = ₹50 − ₹30 = ₹20. BEP (units) = ₹1,00,000 ÷ ₹20 = 5,000 units. BEP (₹) = 5,000 × ₹50 = ₹2,50,000. (b) Required units = (Fixed Cost + Desired Profit) ÷ Contribution per unit = (₹1,00,000 + ₹40,000) ÷ ₹20 = 7,000 units. The firm therefore needs to sell 2,000 units more than BEP to earn ₹40,000 profit. This direct profit-target translation is precisely why breakeven analysis is a control technique.
Case 4. Two divisions of a conglomerate report: Division A — ₹50 lakh net income on ₹400 lakh investment; Division B — ₹40 lakh net income on ₹250 lakh investment. Calculate ROI for each. Which division shows better controlling efficiency? Why?
Answer: ROI of Division A = (50 ÷ 400) × 100 = 12.5%. ROI of Division B = (40 ÷ 250) × 100 = 16%. Division B shows better controlling efficiency: it earns a higher return per rupee invested, indicating better capital deployment, tighter cost control, and more efficient operations. Although Division A's absolute profit (₹50 lakh) is higher, ROI as a percentage normalises across investment size — which is why NCERT calls ROI the "basic yardstick" of management control. The conglomerate should investigate Division A's lower ROI: is the investment under-utilised? Are costs out of control? Should the standard be revised?
Case 5. A large infrastructure project has 1,200 inter-dependent activities. The project manager must monitor progress without micromanaging every task. Recommend a control technique and explain how it integrates with NCERT's principles of CPC and MBE.
Answer: The recommended technique is PERT & CPM (Programme Evaluation & Review Technique / Critical Path Method). The project is broken into 1,200 activities; expected times are estimated; activities are sequenced into a network; the critical path — the longest sequence of dependent activities — is identified. The manager monitors progress against this critical path. PERT/CPM integrates seamlessly with NCERT's principles: (i) Critical Point Control — the critical-path activities are themselves the KRAs; only delays on these directly threaten project completion. (ii) Management by Exception — non-critical activities have slack; deviations within slack do not require management attention, while deviations on critical-path activities do. The manager focuses managerial talent on what truly matters and lets parallel non-critical activities self-manage with subordinate oversight.
📚 End-of-Book Acknowledgement
📝 Final Competency-Based Questions — Conclusion & Synthesis
Source-based scenario: A business-studies graduate is appointed Operations Lead at a tech start-up. In her first 90 days, she must (a) revamp the airline-DCS-style real-time monitoring of customer-success metrics; (b) diagnose why the firm's on-time-delivery has dropped from 95% to 82% over six months; (c) introduce a budgetary-control regime; and (d) ensure that the founders are escalated only on significant deviations.
Q1. Which control technique combination best addresses all four objectives simultaneously?
L3 ApplyAnswer: (b) — MIS provides DCS-style real-time monitoring; Budgetary Control covers (c); MBE ensures founders see only significant deviations (d); Responsibility Accounting assigns each on-time-delivery target to a centre-head, supporting (b). This combination directly addresses all four objectives, while options (a), (c) and (d) each address only one or two.
Q2. Walk through the five-step process the Operations Lead should use to diagnose the on-time-delivery drop from 95% to 82%.
L4 AnalyseAnswer: Step 1 (Set standards) — confirm "95% on-time" is still a realistic standard or revise to industry benchmark. Step 2 (Measure performance) — pull last six months' delivery logs from the MIS. Step 3 (Compare) — quantify month-on-month deviation (95→92→89→86→84→82). Step 4 (Analyse deviations) — apply Critical Point Control to focus on warehouse, dispatch, last-mile and customer-update — the four critical points. Use MBE to investigate the largest single contributor. Identify the cause: courier-partner failure? Demand spike? System bug? Step 5 (Corrective action) — depending on cause: switch courier, hire seasonal staff, fix the bug, or revise the 95% standard if industry has shifted.
Q3. Critically evaluate: "Now that we have an MIS, the controlling function can be fully automated and human managers are no longer needed for control."
L5 EvaluateAnswer: The statement is false. NCERT lists four NCERT limitations of controlling that no MIS can overcome alone: (i) qualitative standards like morale and culture cannot be fully quantified — human judgement is essential; (ii) external factors cannot be controlled by software; (iii) employee resistance to surveillance is amplified, not solved, by digital monitoring; (iv) MIS itself is a costly affair and must satisfy a cost-benefit test. Furthermore, the corrective-action step (Step 5) often requires human judgement: should we retrain, replace, or revise the standard? An MIS can flag deviations and predict their consequences but cannot decide what is fair, motivating or strategic. Therefore MIS augments — not replaces — managerial control.
Q4. (HOT) Synthesise the entire NCERT framework: design a one-page "Manager's Control Charter" that ties together the meaning, importance, limitations, planning–controlling link, five-step process, CPC, MBE, and at least three techniques. Ensure each element of the chapter is explicitly referenced.
L6 CreateSample Charter: 1. Purpose: Control ensures actual activities conform to plans (NCERT meaning) and serves six benefits — goals, standards, resources, motivation, discipline, coordination. 2. Principle: Treat planning & controlling as inseparable twins; "planning without controlling is meaningless, controlling without planning is blind". 3. Process — every quarter: (a) Set 5 quantitative + 2 qualitative standards (Step 1). (b) Measure via MIS dashboard + sample checks (Step 2). (c) Compare via variance reports (Step 3). (d) Apply CPC: focus only on Customer-Success, Cash-Flow, Quality, Talent — the four KRAs. Apply MBE: escalate only deviations beyond a 5% tolerance band (Step 4). (e) Corrective action via training, resource reallocation or standard revision (Step 5). 4. Toolkit: Budgetary Control (master + sales + production + cash budgets); Ratio Analysis (current ratio, gross-profit ratio, ROI); Responsibility Accounting (cost / profit / investment centres). 5. Honest Limits: respect NCERT's four limitations — quantify what we can, accept what we can't, dialogue with employees on monitoring, never let cost exceed benefit. 6. Closing Loop: Every quarter's deviation report feeds back into the next quarter's plan. The Charter explicitly references every NCERT element of Chapter 8 and binds them into one coherent management practice.
🔗 Final Assertion–Reason Questions (Class 12 Format)
Options: (A) Both A & R true, R correctly explains A · (B) Both true, R does not explain A · (C) A true, R false · (D) A false, R true.
Assertion (A): The breakeven point for a firm with Fixed Cost ₹40,000, Selling Price ₹40 and Variable Cost ₹20 is 2,000 units.
Reason (R): Breakeven Point in units = Fixed Cost ÷ (Selling Price per unit − Variable Cost per unit), and the contribution margin per unit here is ₹20.
Answer: (A) — Both Assertion and Reason are true, and Reason correctly explains Assertion. ₹40,000 ÷ (₹40 − ₹20) = ₹40,000 ÷ ₹20 = 2,000 units. The Reason (formula + contribution margin) is precisely what produces the Assertion's BEP.
Assertion (A): Return on Investment is the basic yardstick for measuring whether or not invested capital has been used effectively.
Reason (R): ROI is expressed as a percentage and therefore enables comparisons across firms, divisions and time-periods on a common basis.
Answer: (A) — Both Assertion and Reason are true, and Reason correctly explains Assertion. NCERT specifically describes ROI as the "basic yardstick" of management control because percentage-form normalises across firm size and time-period, making it the universally comparable measure.
Assertion (A): An MIS supports both Critical Point Control and Management by Exception in real time.
Reason (R): A good MIS filters data to avoid information overload and routes only management-relevant items to the right manager at the right time.
Answer: (A) — Both Assertion and Reason are true, and Reason correctly explains Assertion. By filtering the firehose of data into KRA-aligned reports (CPC) and surfacing only significant deviations (MBE), an MIS operationalises both NCERT principles in real time.
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