Answers to Sample Question Paper – 3
1. (b) Middle growth of an employee in all respects. It
2. (d) Trade
3. (b) Social environment
4. (b) Informal communication
5. (a) Quantitative standard
6. (a) Discipline
7. (b) Enhance employee productivity
8. (a) District Commission
9. (c) 
Management helps in achieving
personal objectives
10. (c) (ii), (i), (iv), (iii), (v)
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11. (c)  Discount Finance House of India
(DFHI)
12. (d) Both (a) and (b)
13. (b) Security Needs
14. (b) Surviving in the competitive market
15. (a) Economic Environment
16. (a)  Planning and controlling are
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separable twins of management.
17. (a) (iii), (i), (ii)
18. (b) Growth
19. (c) Perquisites
20. (a) Statement I is true and II is false
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21. Rishi did not perform the step of
estimation of manpower requirement
properly. While doing this estimation,
B
two analysis, i.e., workload and workforce
analysis, are needed. Workload analysis
enables an assessment of the number
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and type of human resource necessary
for the performance of various jobs and
accomplishment of organisational objectives,
whereas workforce analysis enables
assessment of number and type of human
resource available in the organisation. This
step of estimation of manpower requirement
is the foundation for all other steps of staffing.
Or
‘Some learning opportunities are designed
and delivered to improve skills and abilities of
employees’. It refers to training. It involves
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Model Test Papers_1-5_(Solved).indd 1
has a wider perspective. It seeks to develop
competence and skills for future performance.
Thus, it has a long term perspective.
‘Some others are designed to help in
the growth of individuals in all respects’.
It refers to development. It is the process
of increasing the knowledge and skills of
an employee for doing a particular job. The
objective of training is to achieve a change
in the behaviour of those trained personnel.
22. The two factors affecting fixed capital
requirement of Excel Ltd. are:
(a) Diversification. If a company intends
to diversify into new product line, higher
fixed capital will be required for research
and development and building infrastructure
capacities.

(or any other relevant point)
23. The various functions of packaging
are:
(a) Product protection. The content
of product is protected against spoilage,
breakage, leakage, damage, climatic effects,
etc. due to proper packaging. This protection
facilitates its storage, distribution and
transportation.
(b) Product identification. Packaging
becomes a mean of product differentiation
and identification for some brands.
(c) Facilitating use of the product.
Packaging makes it convenient for the
consumers to open, handle and use the
product.
(d) Product promotion. Packaging has
become a way of promoting the product.
With rising standard of health and hygiene,
people are asking for packed products
instead of loose ones. Further, innovative
i
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 Sample Question Paper-3 (Solved)
packs are increasing the scope of marketing of
products. (any three)
Or
The factors affecting pricing of a product are:
(a) Product cost. The cost of producing
a good or service sets the minimum level
of price to be set for a product. All the
firms strive to cover their costs at least in
the long run. In addition, they aim to earn a
margin of profit above it.
(b) Utility and demand. The utility
provided by the product and intensity of
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demand of the customer sets the upper limit
of price for a product. The buyer is ready
to pay the price which is less than or equal
to the utility derived from the product.
Thus, a product having higher utility can
be highly priced. Similarly, intensity of
demand determines its elasticity. If demand
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of a product is elastic, firm cannot fix higher
prices but if the demand is inelastic, the firm
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can fix higher prices also.
 performance. Understanding of business
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B
(or any other relevant point)
24. Kavya will get the following benefits
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after sharing her responsibility.
(a) Effective management. Managers are
able to function more efficiently as they
get more time to concentrate on high
priority activities. They can excel in
new areas by delegating the routine
work to their subordinates.
(b) Basis of management
hierarchy. Delegation of authority
establishes the superior-subordinate
relationship as the degree of authority is
determined by it. The extent of authority
delegated determines the power each
job position has in an organisation.
Model Test Papers_1-5_(Solved).indd 2
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(c) Better coordination. As delegation of
authority fixes authority, responsibility and
accountability, it also defines the powers,
duties and answerability of various positions
in an organisation. This brings clarity about
the work and reporting relationship among
the employees. Thus, maintaining effective
coordination amongst the departments.
25. The importance of understanding
business environment is as follows:
(a) Enables the identification of
opportunities and getting the first mover
advantage. Opportunities are the favourable
changes in the business environment which
can help a firm to improve its
performance. Early identification of the
opportunity helps an enterprise to take
the first mover advantage otherwise it
would be lost to its competitors.
(b) Helps in identification of threats
and early warning signals. Threats are
the unfavourable changes in business
environment that can hinder a firm’s
environment helps a manager to identify the
threats on time so that he could prepare to
meet them by taking appropriate measures.
(c) Helps in tapping useful resources. An
enterprise depends on the environment as a
source of inputs and as an outlet for outputs.
The understanding of business environment
enables an enterprise to procure the resources
it needs and convert them into output that
the environment desires.
(d) Helps in coping with rapid changes.
Todays’ business environment is changing
rapidly. In order to effectively cope up with
the significant changes, a manager must
understand and examine the environment
and, then, develop suitable course of action.
(e) Helps in planning and policy
formulation. While deciding the future
course of action or formulating guidelines for
decision making, understanding of business
environment plays an important role.
Identifying opportunities or threats in the
business environment can help in making
future strategies.  (any four)
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 S-3 MBD Sure Shot CBSE Sample Papers Business Studies-XII
26. The protective functions of Securities
and Exchange Board of India (SEBI) are:
(a) It prohibits fraudulent and unfair trade
practices like price rigging and manipulation
in the securities market.
(b) It prohibits insider trading and impose
penalties for such practices.
(c) It undertakes steps for protection of
investors.
(d) It promotes fair practices and code of
conduct in securities market.
Or
The regulatory functions of Securities and
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Exchange Board of India (SEBI) are:
(a) It registers brokers, sub-brokers and
other players in the market.
(b) It registers the collective investment
schemes and mutual funds.
(c) It regulates stock brokers, portfolio
exchanges, underwriters, merchant bankers
and business in stock market and other
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securities market.
(d) It regulates the takeover bids of
companies.
27. (a) Marketing
(b) The three features of Marketing are:
(i) Needs and wants. Satisfaction of
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the needs and wants of individuals and
organisation is the main target of marketing.
(ii) Creating a market offering. Efforts are
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made to create an attractive ‘market offer’
for which detailed analysis of requirement of
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buyers is done.
(iii) Customer value. Customers want
maximum worth/satisfaction for their money.
Therefore, sellers should offer best quality
products which proves its worth/value in the
eyes of customers.
(iv) Exchange mechanism. Exchange is the
essence of marketing which involves two or
more parties coming together to obtain the
product or service for which something is
given in return. (any three)
28. Nishi suggested the CEO that financial
incentive should be offered to the
employees. She suggested co-
partnership or stock option to him.
Model Test Papers_1-5_(Solved).indd 3
The two incentives of the same category are:
(a) Bonus. It is an incentive offered over
and above the wages/salary to the employees.
It is a reward for good performance.
(b) Profit sharing. Many organisations
share their profits with their employees,
who are the key resource for generating it.
It motivates the employees to improve their
performance and contribute to increase in
profits.
(c) Retirement benefits. Retirement
benefits such as provident fund, provision
and gratuity provide financial security to the
employees. It acts as a motivating factor for
them. (any two)
29. (a) Time study. It is an art of observing
and recording the time required to do each
The purpose of time study is to determine
the precise time required for each element of
a man’s work. It helps in fixing the standard
time required to do a particular job.
(b) Fatigue study. It seeks to determine
the amount and frequency of rest intervals in
completing a task. This rest interval will help
one to regain stamina and work again with
same capacity. To ensure good performance,
other causes for fatigue such as long working
hours, bad working environment, uncordial
relations with the boss, etc. should also be
removed.
Or
Coordination is required at all the levels
and departments of the organisation. Every
activity undertaken is coordinated with
other activities and then performed. This is
because all the activities in the organisation
are interdependent. Further, coordination
is not a task confined to top level managers
only but managers at different levels
coordinate the activities of organisation.
The top level seeks to coordinate the overall
policies of the organisation, middle level
needs to coordinate with the top level and
departmental activities. The lower level
seeks to coordinate the activities of the
workers.
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 Sample Question Paper-3 (Solved)
30. Functional structure is an
organisational structure which is formed by
grouping similar or related jobs together. In
Managing Director
Human Marketing
Resource
Functional Structure
The disadvantages of functional structure
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are:
(a) Functional head emphasise more on
their departmental objectives rather than
common organisational objective. This may
hinder the interaction between two or more
departments.
(b) As the departments emphasise on
their own functions, it may lead to problems
in coordination.
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(c) Inter-department conflicts may arise
in the absence of clear cut responsibility
allocation.
(d) It may lead to inflexibility as personnel
specialises in a particular function and are
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unable to gather experience in diverse areas.
(any three)
31. (a) Kabir can lodge his complaint at
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District Commission as the final value of goods or
services paid as consideration does not exceed one
crore rupees.
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A district commission includes a president (who
can be a working or retired judge of the District
Court) and two other members. They are
appointed by the state government. One can file a
complaint for goods and services of ₹1 crore or less
in this agency. For the complaints filed, if the
district commission feels a requirement, it sends
the goods to the laboratory for testing and gives its
decision based on the laboratory report and facts.
(b) If any of the parties are not satisfied by the
order of District Commission can appeal against
such order to the State Commission on the grounds
of facts or law within a period of 45 days from the
date of order.
Model Test Papers_1-5_(Solved).indd 4
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this structure, departments are created on
the basis of functions.
Finance Production
32. Abraham Maslow, an American
psychologist, gave his theory on motivation.
His theory was based on human needs and he
classified human needs into five categories in
order of priorities.
(a) Physiological needs. These are
need of food, clothing, shelter etc. come under
this head. The basic salary of the job will
satisfy this need.
(b) Safety needs. These imply protection
from any kind of physical or emotional harm.
Giving job security or stability of income can
fulfil this need.
(c) Belongingness needs. These refer to
affection, sense of belongingness, acceptance
and friendship. Cordial relationships with
colleagues will satisfy these needs.
(d) Esteem needs. These refer to the
desire of self-respect, recognition and
attention in an individual. Giving status or
job title can satisfy these needs.
(e) Self-actualisation needs. These are
the highest level of needs in the hierarchy. It
is the drive to become what one is capable of
becoming.
Maslow based his theory on the following
assumptions:
(a) People’s behaviour is based on their
needs. Satisfaction of such needs influences
their behaviour.
(b) People’s needs are in hierarchical order
starting with basic needs to the higher level
needs.
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 S-5
Self
actualisation
needs
Esteem Needs
Affiliation/
Belongingness needs
Safety/
Security needs
Basic Physiological Needs
(c) A satisfied need can no longer motivate
a person, only next higher level can motivate
him.
(d) As a need is satisfied, a person moves
to the next higher lever of the hierarchy.
Maslow’s need hierarchy theory helps the
management to understand the human
needs and frame suitable incentive schemes
for their employees. The incentives are also
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designed accordingly, i.e., monetary/financial
incentives which aim at satisfying basic
physiological and safety/security needs of the
employees and non-monetary/non-financial
incentives which aim at satisfying the higher
three levels of needs.
D
Or
The importance of controlling is as follows:
(a) Helps in achieving objectives.
B
Controlling regularly monitors the
performance of the organisation and
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measures its progress towards the realisation
of the organisational goals. If any deviation
is observed, timely corrective action is
taken. By doing this, controlling helps in
accomplishment of the goals effectively and
efficiently.
(b) Motivates employees. A good control
system provides performance standards
for every one and every activity in the
organisation. The employees know well in
advance what they are expected to do and
what are the standards against which they
will be judged. This motivates them to give
good performance.
Model Test Papers_1-5_(Solved).indd 5
MBD Sure Shot CBSE Sample Papers Business Studies-XII
(c) Helps in achieving better
coordination. Controlling provides direction
to all the activities in the organisation.
Each department and every employee is
governed by predetermined standards which
are well coordinated with one another.
Thus, controlling helps in achieving better
coordination.
(d) Helps in better planning.
Controlling enables the management to judge
whether the standards set are accurate or
not. Further, controlling keeps an eye on the
changing business environment. It reviews
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and revises the standards in the light of such
changes and thus, improves planning.
(e) Facilitates decision-making. When
the deviations are analysed in controlling,
ro the manager takes the appropriate decision
in order to check the re-occurrence of
deviations. In the light of these deficiencies
or deviations, decision-making is necessary
to remove the causes of these deviations.
(any four)
33. (a) The two financial management
decisions are investing and financing
decisions.
(b) Three factors which will affect the
financing decision are:
(i) Cash flow position. The company
is under legal obligation to pay a fixed rate
of interest to debentureholders, dividend to
preference shares and principal and interest
amount for loan. Sometimes, company makes
sufficient profit but it is not able to generate
cash inflow for making payments. A stronger
cash flow position of the company will allow
the company to meet its interest obligations
easily and, hence they will prefer to take the
debt.
(ii) Fixed operating costs. Debt
component in the capital increases
the financial risk in the form of fixed
commitments towards interest payments
and other obligations. Hence, if the firm has
higher fixed operating costs, then it should
decrease the debt component in the total
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 Sample Question Paper-3 (Solved)
capital whereas if fixed operating costs
are lower, then the firm can easily
increase the debt component in the capital.
(iii) Control considerations. Issue of
equity leads to dilution of control in the
management. The equity shareholders are
considered as the owners of the company and
they have complete control over the company.
They take all the important decisions for
managing the company. The debentureholders
have no say in the management and
preference shareholders have limited right to
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vote in the annual general meeting. So, the
total control of the company lies in the hands
of equity shareholders.
If the owners and existing shareholders
want to have complete control over the
company, they must employ more of debt
securities in the capital structure because if
more of equity shares are issued, then another
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shareholder or a group of shareholders may
purchase many shares and gain control over
the company.
(c) If the directors want to utilise retained
earnings as a part of financing in the
given project, then they will declare lesser
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dividends in order to utilise the earnings for
the expansion project.
34. The function of management
B
highlighted in the given statement is
Planning.
M
The advantages of Planning are:
(a) Planning provides direction. Under
planning, the objectives of the
organisation are defined in simple and
clear words. The obvious outcome of this is
that all the employees get a direction and all
their efforts are focused towards a particular
end. In this way, planning has an important
role in the attainment of the objectives of the
organisation.
(b) Planning reduces the risk of
uncertainty. Planning is always done for
future and future is uncertain. With the
help of planning possible changes in future
Model Test Papers_1-5_(Solved).indd 6
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are anticipated and various activities
are planned in the best possible way. In
this way, the risk of future uncertainties
can be minimised.
(c) Planning facilitates decision-making.
Planning ensures foreseeing future and
choosing the best alternative available. The
managers evaluate the positive and negative
aspects of each alternative and choose the
one with least negative consequence, having
feasibility and profitability. Through this, a
direction is provided to all the activities of the
organisation which acts as basic guidelines
to the managers for decision-making.
(d) Planning reduces overlapping and
wasteful activities. Planning serves as a
basis of coordinating the activities and efforts
It ensures clarity in thoughts and actions.
Useless activities are eliminated and
overlapping of work is avoided.
(e) Planning promotes innovative
ideas. Planning gives shape to new ideas.
Many innovative ideas are scrutinised and
evaluated during the planning process.
Or
The steps in the process of Organising are:
(a) Identification and division of work.
It is the first step in the process of organising,
wherein the work is identified and divided into
manageable activities, so that, duplication of
work is avoided and the burden of work can
be shared among the employees.
(b) Departmentalisation. After dividing
the work into smaller and manageable
activities, departments are created by
grouping together, the activities of similar
nature. This grouping can be done on the
basis of territory, product or function etc.
(c) Assignment of duties. After
departmentalisation, each department is
placed under the charge of an individual.
This job allocation is done to the individuals
considering their skills and competencies.
The work must be assigned to those who are
best suited to perform it well.
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 S-7 MBD Sure Shot CBSE Sample Papers Business Studies-XII

(d) Establishing reporting relationships. After allocation of work, an individual should

be made clear as to whom he is accountable and from whom he should take orders. The
establishments of such relationships create structure and enhance coordination among
the various departments.

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