CBSE Class 12 Entrepreneurship Question Paper 2020 Set 2 Solutions

Strictly Confidential: (For Internal and Restricted use only)
Senior School Certificate Examination-2020
Marking Scheme – ENTREPRENEURSHIP
(SUBJECT CODE 066) (PAPER CODE – HMJ /4)
General Instructions: -

1. You are aware that evaluation is the most important process in the actual and correct
assessment of the candidates. A small mistake in evaluation may lead to serious
problems which may affect the future of the candidates, education system and teaching
profession. To avoid mistakes, it is requested that before starting evaluation, you must
read and understand the spot evaluation guidelines carefully. Evaluation is a 10-12
days mission for all of us. Hence, it is necessary that you put in your best efforts
in this process.
2. Evaluation is to be done as per instructions provided in the Marking Scheme. It should
not be done according to one’s own interpretation or any other consideration. Marking
Scheme should be strictly adhered to and religiously followed. However, while
evaluating, answers which are based on latest information or knowledge and/or
are innovative, they may be assessed for their correctness otherwise and marks
be awarded to them.
3. The Head-Examiner must go through the first five answer books evaluated by each
evaluator on the first day, to ensure that evaluation has been carried out as per the
instructions given in the Marking Scheme. The remaining answer books meant for
evaluation shall be given only after ensuring that there is no significant variation in the
marking of individual evaluators.
4. Evaluators will mark( √ ) wherever answer is correct. For wrong answer ‘X”be marked.
Evaluators will not put right kind of mark while evaluating which gives an impression that
answer is correct and no marks are awarded. This is most common mistake which
evaluators are committing.
5. If a question has parts, please award marks on the right-hand side for each part. Marks
awarded for different parts of the question should then be totaled up and written in the
left-hand margin and encircled. This may be followed strictly.
6. If a question does not have any parts, marks must be awarded in the left-hand margin
and encircled. This may also be followed strictly.
7. If a student has attempted an extra question, answer of the question deserving more
marks should be retained and the other answer scored out.
8. No marks to be deducted for the cumulative effect of an error. It should be penalized
only once.
9. A full scale of marks 0-70 has to be used. Please do not hesitate to award full marks if
the answer deserves it.
10. Every examiner has to necessarily do evaluation work for full working hours i.e. 8 hours
every day and evaluate 20 answer books per day in main subjects and 25 answer books
per day in other subjects (Details are given in Spot Guidelines).
11. Ensure that you do not make the following common types of errors committed by the
Examiner in the past:-
• Leaving answer or part thereof unassessed in an answer book.
• Giving more marks for an answer than assigned to it.
• Wrong totaling of marks awarded on a reply.
• Wrong transfer of marks from the inside pages of the answer book to the title page.
• Wrong question wise totaling on the title page.
• Wrong totaling of marks of the two columns on the title page.

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• Wrong grand total.
• Marks in words and figures not tallying.
• Wrong transfer of marks from the answer book to online award list.
• Answers marked as correct, but marks not awarded. (Ensure that the right tick mark
is correctly and clearly indicated. It should merely be a line. Same is with the X for
incorrect answer.)
• Half or a part of answer marked correct and the rest as wrong, but no marks
awarded.

12. While evaluating the answer books if the answer is found to be totally incorrect, it should
be marked as cross (X) and awarded zero (0)Marks.

13. Any unassessed portion, non-carrying over of marks to the title page, or totaling error
detected by the candidate shall damage the prestige of all the personnel engaged in the
evaluation work as also of the Board. Hence, in order to uphold the prestige of all
concerned, it is again reiterated that the instructions be followed meticulously and
judiciously.

14. The Examiners should acquaint themselves with the guidelines given in the Guidelines
for spot Evaluation before starting the actual evaluation.

15. Every Examiner shall also ensure that all the answers are evaluated, marks carried over
to the title page, correctly totaled and written in figures and words.

16. The Board permits candidates to obtain photocopy of the Answer Book on request in an
RTI application and also separately as a part of the re-evaluation process on payment of
the processing charges.

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MARKING SCHEME 98/4 (SERIES HMJ/4)
ENTREPRENEURSHIP (066)
2020
Q.No. Question with Expected Answers Marks

SECTION A
Fill in the blanks:
Q. 1 Samar is a budding rural entrepreneur who is working on improving the 1
health index of the women in rural areas. Samar needs to understand
various health issues confronted by women in order to create a socially
committed organization. For this, he wants to gather information about the
target market or customers in an organized manner. This organized effort
of Samar is known as ____________________
Ans. Market research 1

Q. 2 “Welsa Moto Corp’s electric vehicles with zero tail pipe emission are 1
emerging as a good alternative to two major problems; (i) climatic change
due to auto exhaust and (ii) increasing pollution leading to ill health. This
Act of ‘Welsa Moto Corp’s has taken care of _________________ and
_________________ elements of macro environment.
Ans. Social and Ecological 0.5+0.5 =1
Q. 3 Amit, an entrepreneur, is always in touch with the changes taking place in
the environment. He identifies opportunities and finds strategies to
capitalize on these opportunities at the earliest. Sensing the requirement of
providing reasonably priced food at their own place within no time with
multiple options, he started the first online food network in India. Because
of ________________ advantage, he was able to capture more than 85% of
the market share in no time.
Ans. First Mover 1 mark for
correct
answer
Q. 4. ________________ feature of partnership states that any partner can act on 1
behalf of the firm.
Ans. Implied Authority 1 mark for
correct
answer
OR

________________ process of entrepreneurship involves the translation of 1
a useful idea into an application which has commercial value.
Ans. Innovation 1 mark for
correct
answer
Q.5 __________________ and ________________ are the components of a 1

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Brand shown in the figure.
Ans. Brand name and Brand mark 0.5+0.5 mark
for each
correct
answer
Q. 6. ___________________ is an affluent individual, who provides capital for a 1
business start-up having a high-risk, high-return matrix usually in exchange
for convertible debt or ownership equity.
Ans. Business Angel / Informal investor / Angel investor ( any one ) 1 mark for
correct
answer

State whether the following statements are true or false :
Q. 7. A financial plan is a projection of key financial data about the potential 1
investment commitment needed for the new venture.
Ans. True 1 mark for
correct
answer
Q. 8. SWOT Analysis means to consider (a) Strengths (b) Weakness (c) 1
Opportunities and (d) Tenure of Business.
Ans. False 1 mark for
correct
answer
Q. 9. Primary Market facilitates transfer of resources from the savers to the 1
entrepreneurs seeking funds for setting new enterprises
Ans. True 1 mark for
correct
answer
Q. 10 Gupta is the owner of KYC stores dealing in grocery items. He has an 1
equity stake of Rs.4,00,000 in the business. He has borrowed Rs.6,00,000
from State Bank of India. His net profit for the year is Rs.1,40,000. The
Return on Equity for Gupta will be 23.33%.
Ans. False 1 mark for
correct
answer
Q.11 In a Reverse acquisition a public company takes over a private company. 1

Ans. False 1 mark for
correct
answer
OR Sales promotions initiatives are often referred to as ‘above the line’ 1
activities.
Ans. False 1 mark for
correct

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answer
Q.12. The secondary market enhances the marketability of securities and 1
provides liquidity to investments.

Ans. True 1 mark for
correct
answer
Multiple Choice Questions
Q.13. Gross working capital means: 1
(a) sum total of all assets.
(b) sum total of all fixed assets.
(c) sum total of all current assets.
(d) current assets minus current liabilities.
Ans. (c) 1 mark for
correct
answer
Q.14. Marketing plan is a document: 1
(a) regarding the marketing objectives , strategies and activities to be
followed by the new Enterprise.
(b) which describes the flow of goods/services from production point to
the customers.
(c) which determines how many units must be sold or how much sales
volume must be achieved in order to have break-even-point .
(d) which reflects the projected cash available with the Enterprise .
Ans. (a) 1 mark for
correct
answer
Q.15 Growing flowers and selling to floral decorators is an example of the 1
following source of idea field :
(a) Service sector ideas (b) Trading related ideas
(c)Natural resources (d) Market driven ideas

Ans. (c) 1 mark for
correct
answer
Q.16. Rushan devised an apparatus to measure the quality of air at home which 1
can be fitted in any Air conditioner and the air conditioner can become an
air purifier as well. His product is still in the pre-commercialization stage.
Rushan wants to exclude others from making, using, selling and importing
this apparatus. The intellectual property right which Rushan will have to
obtain is :
(a) Copyright
(b) Patent
(c) Industrial design
(a) Trade mark

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Ans. (b) 1 mark for
correct
answer
Q.17 How many whole time members are nominated by the Union Government 1
of India to Securities and Exchange Board of India?
(a) 2
(b) 3
(c) 4
(d) 6
Ans. b) 1

(In case the candidate has given any other answer it should be marked
correct)
SECTION B
Q.18. Sanjana graduated from National Institute of Fashion Studies and wants to 2
start her own boutique. She wants to understand the feasibilities and
viability of the proposed venture. This will also facilitate her in assessing
and making provisions for the bottlenecks in the progress and
implementation of the idea. She also wants to know about the success of
the project along with the risk factors involved.
Identify and give the meaning of the document which is required by
Sanjana on the basis of the above para.
Ans. Business Plan 1 mark for
identification
The business plan is a comprehensively written down document and 1 mark
prepared by the entrepreneur describing formally all the relevant for meaning
external and internal elements involved in starting a new venture.

Q.19. Mahesh, an entrepreneur is planning to enter into a new business of 2
manufacturing laptop bags with an inbuilt lock facility. Being highly
complex and tedious, its manufacturing operations need to be well planned.
He decides that the complete bag will be manufactured at his own factory
i.e. no part of its manufacturing process will be outsourced.
Identify the important component of business plan that is discussed above.
Also, state what needs to be described in the above stated manufacturing
situation.

Ans. Production Plan. 1 mark for
identification
Complete Manufacturing: If the manufacturing is to be carried out in and 1 mark
whole by the entrepreneur, he/she will need to describe: for
explanation
i) the physical plant layout,
ii) the machinery and equipment required to perform the
manufacturing operations,
iii) raw materials and suppliers names, addresses, terms and

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conditions,
iv) cost of manufacturing,
v) any future capital equipment required etc.
Q.20. State any four ways in which creative ideas can be generated. 2

Ans. 1. Develop a new product or service. 0.5 x4 =2
2. Improve an existing product or service
3. Find a new process or resource for manufacturing a product.
4. Find new markets for existing products or services.
5. Find a new use of an existing product or service

( ANY FOUR )

OR
State any four sources which lead to the emergence of basic ideas. 2
Ans. 0.5 x4 =2
Following are the various sources which lead to the emergence of basic
ideas.
a) Problems: When a problem exists, an idea leads to a solution to
resolve that problem; it emerges as a business opportunity.
b) Change: A change in social, legal, technological aspects etc. leads to
new opportunities to start a business.
c) Inventions: New products or services lead to new business
opportunities.
d) Competition: Competition often results in emergence of new and
better ideas that result in new business opportunities.
e) Innovation: Creating new things of value as well as new and creative
processes that add value to the existing products or services.

( ANY FOUR )

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)
Q.21. State any four advantages of ‘penetration pricing’ method to the firm. 2

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Ans. The advantages of penetration pricing to the firm are: 0.5x4 =2
1. It can result in fast diffusion and adoption. This can achieve
high market rates quickly.
2. It can create goodwill among the early adopters segment.
3. It creates cost control and cost reduction pressures from the
start, leading to greater efficiency.
4. It discourages the entry of competitors.
5. It can create high stock turnover throughout the distribution
channel
6. This can create critically important enthusiasm and support in
the channel.

( ANY FOUR )
OR
State any four purposes of ‘Logo’. 2
Ans. Purposes of logo are:- 0.5x4 =2
1. Logos are a critical aspect of business marketing. As the
company's major graphical representation, a logo anchors
company's brand.
2. Corporate Logo is intended to be the ‘Identity’ of an enterprise
because of displaying graphically enterprise's uniqueness.
3. Through a set color combination, fonts, images, impression
and/or pattern, logos provide essential information about a
company that allows customers to relate with the enterprise's
core brand.
4. Enterprises normally resort to logo as a short path for
advertising and other marketing materials.
5. Logos act as the key visual component of an enterprise's overall
brand identity.

( ANY FOUR )

Q.22. Government banned the use of polythene bags and single use plastic 2
material in order to curb the increasing pollution level by dumping of
plastics. Harjot took this as an opportunity and is planning to manufacture
biodegradable bags of different sizes by processing the sugarcane bagasse.
Create a logo and a tagline for the bags manufactured by Harjot.
Ans. Any relevant Logo and Tagline 1 mark for
logo +1 mark
for tagline
Q.23. Give the meaning of ‘Cash Conversion Cycle’. How is Cash Conversion 2
Cycle of a trading concern different from a manufacturing concern?
Ans. The duration between buying the raw material and receiving the cash 1 mark for
from the customer is known as the Cash Conversion Cycle. meaning + 1
Or mark for

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The cash conversion cycle (CCC or Operating Cycle) is the length of difference
time between a firm’s purchase of inventory and the receipt of cash
from accounts receivable.

Trading concern Manufacturing concern
The Cash Conversion Cycle of a The Cash Conversion Cycle of a
trading concern will be shorter. manufacturing concern will be
longer.
Q.24 ‘Pipro Ltd.’ is a software company based in Bengluru, India. It is already 2
listed at National Stock Exchange. In order to expand its business in north -
east, under the ‘Look East Policy’ of the government, it needs financial
resources.
State any two methods through which she can fulfill her financial
requirements through Primary Market other than Public issue.
Ans. a) Rights issue: Rights issue is a method of raising additional finance 0.5 for
from existing shareholders by offering securities to them on pro-rata headings
basis i.e. giving them a right to a certain number of shares in +0.5 for
proportion to the shares they are holding. explanation

b) Private placement: It means the direct sale by a company of its (1+1=2)
securities to a limited number of sophisticated investors and the
institutional investors like: i) Unit Trust of India ii) Life Insurance
Corporation of India iii) General Insurance Corporation of India iv)
Army Group Insurance v) State Level Financial Corporations, etc.

c) Offer to employees: This method enables employees to become
shareholders and share the profits of the company.

(ANY TWO )

SECTION C
Q.25. With the help of any three points, explain why is it important for a business 3
to understand the environment in which it operates.
Ans. The importance of understanding the relevant environment of business 1x3=3
are:

i) Identification of opportunities to get first mover advantage: By
keeping in touch with the changes in the external environment, an
enterprise can identify opportunities and find strategies to capitalize
on the opportunities at the earliest.

ii) Formulation of strategies and policies: It helps in identifying
threats and opportunities in the market. These can serve as the basis
of formulation of strategies to counter threats and capitalize on
opportunities in the market.

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iii) Tapping useful resources: If a company has a thorough
knowledge of the external environment, it can tap raw materials,
technology and even financial resources from the market at
economical prices.

iv) Better performance: Proper understanding of the various elements
of the external environment is necessary to take timely action to deal
with threats and avail opportunities to improve performance of the
firm.

v) Sensitization of entrepreneurs to cope up with rapid changes: A
keen watch on the trends in the environment would help sensitize the
entrepreneur to changing technology, competition, government
policies and changing needs of the customers.

vi) Image building: If a company is sensitive to the external
environment, it will come out with new products and services to meet
the requirements of the customers.

(ANY THREE )

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)
OR
Explain proforma investment decisions and proforma financing decisions 3
as components of a financial plan.
Ans. Proforma investment decisions: It relates to how the enterprise's 1.5 marks for
funds are invested in different assets so that the enterprise is able to each
earn the highest possible returns on investment. The entrepreneur component
should mention investment required for: (1.5+1.5=3)
i) Land and building
ii) Machinery and plant
iii) Installation cost
iv) Preliminary expenses
v) Margin for working capital
vi) Expenses on research and development
vii) Investment in short-term assets viz. raw material, level of
cash, etc.

Proforma financing decisions: It tells all the projected sources of
funds available to the venture to raise finance from debt and equity
after ensuring that the cost of capital and the financial risk stands
minimized and return on investment and profitability stands
maximized.
Q.26. Rohit is working on designing of a unique face mask which would not only 3
filter the air inhaled but also send alert messages on the registered mobile

[10]

number if the user is in a zone of high pollution. This idea is germinated
because of the interest and curiosity of Rohit as he is always interested in
finding out the specific current problems and their solutions. Before
launching his idea he also analysed the pros and cons of the product. Now
he has to complete two more steps of an important process.
Identify the process. Explain the steps to be completed by Rohit in the
process identified.
Ans. Creativity 1 mark for
identification
Step to be taken by Rohit : + 1 mark for
1. Illumination: In this period the idea re-surfaces in a realistic each step
way and entrepreneur comes out with viable plan to give
practical shape by collecting raw-material, arranging funds, 1+2=3
policy–making for the implementation of idea.

2. Verification: Also called the validation or testing stage. This is
where the idea is verified to prove that it has value.
Q27. The footwear industry in India is dominated by ‘B- relax Footwear’. ‘B- 3
relax Footwear’ procures 70% of its raw material from ‘Polymers Ltd’. The
major production of ‘Polymers Ltd. is plastic chips, PU foam and elastic
which is used by ‘B-relax Footwear’ in its manufacturing processes. After
due diligence, they decide to merge with each other. If they merge, ‘B-
relax Footwear’ doesn’t need to look for a vendor and sourcing raw
materials would be seamless. On the other hand, as a result of the merger,
‘Polymers Ltd.’ doesn’t need to worry about the sales and marketing. All
they need to do is to improve their processes to produce better raw
materials for ‘B-relax Footwear’. After the merger the combined entity will
be known as ‘B-relax Inc’.
(i) Identify and explain the type of merger between ‘B- relax
Footwear’ and ‘Polymers Ltd.’
(ii) Why is due diligence required before merger?
(iii) Which is the most dominant reason for this merger? Explain.
Ans. i) Vertical Merger : A vertical merger occurs when two or 1+1+1=3
more firms, operating at different levels within an
industry's supply chain, merge operations

ii) To ensure that the deal is beneficial to both the parties

iii) Synergy : Synergy between the participating firms
determines the increase in value of the combined entity.
Q.28 Calculate the Economic Order Quantity from the following information: 3
(a) Annual consumption – 120 units.
(b) Cost of placing and receiving an order – Rs.20
(c) Price per unit – Rs.100
(d) Storage cost as percentage of average inventory – 12%

[11]

Ans. 𝟐𝟐𝟐𝟐𝟐𝟐 1 mark for
Economic Order Quantity (EOQ) = � 𝑪𝑪 formula
Annual consumption (D) = 120 units 2 marks for
Cost of placing and receiving an order (P) = Rs. 20 working
Storage cost (C) = 12 % of average inventory
𝟏𝟏𝟏𝟏
1+2 =3
= 𝟏𝟏𝟏𝟏𝟏𝟏 X 100 = Rs. 12

𝟐𝟐𝟐𝟐𝟐𝟐
EOQ = � 𝑪𝑪

𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐𝟐
= � 𝟏𝟏𝟏𝟏

= √𝟒𝟒𝟒𝟒𝟒𝟒
= 20 Units
OR
State any six features of Venture Capital Finance. 3

Ans. Features of Venture Capital Finance:- 0.5 for each
statement
1) It is basically equity finance in relatively new companies.
x6= 3
2) It is long-term investment in growth-oriented small or medium
firms.
3) Venture capitalist not only provides capital but also business skills
to investee firms.
4) It involves high risk-return spectrum.
5) It is a subset of private equity.
6) The venture capital institutions have a continuous involvement in
the business after making the investment.
7) Such institutions disinvest the holdings either to the promoters or in
the market.

(ANY SIX)
Q.29 From the given situations, identify and explain the methods of floatation of 3
new issues:
(i) ICICI is in need of additional capital for its new venture. It
decides to raise funds by selling the issues mainly to General
Insurance Corporation of India and Life Insurance Corporation
of India.
(ii) Jay is holding 100 shares of a company. He has been given a

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privilege offer to subscribe to a new issue of the same company
in proportion of his current shareholdings with the company.
Jay was unwilling to subscribe, so he renounced the offer in
favour of Veeru who bought the shares.
(iii) Gopal is working as the Regional Chairman in a well reputed
Non- Banking Finance Company which is listed in Stock
Exchange. As performance bonus, the company gave 25 equity
shares to Gopal.
Ans. (i) Private placement: It means the direct sale by a company of its 0.5 for
securities to a limited number of sophisticated investors and the identification
institutional investors like: i) Unit Trust of India ii) Life + 0.5 for
Insurance Corporation of India iii) General Insurance explanation
Corporation of India iv) Army Group Insurance v) State Level
Financial Corporations, etc. 1x3=3

(ii) Rights issue: Rights issue is a method of raising additional
finance from existing shareholders by offering securities to
them on pro-rata basis i.e. giving them a right to a certain
number of shares in proportion to the shares they are holding.

(iii)Offer to employees: This method enables employees to become
shareholders and share the profits of the company
SECTION D
Q.30 There are various ways in which an entrepreneur can spot trends. Describe 4
the four ways of identifying the trends with the help of examples.

Ans. Ways in which an entrepreneur spots trends:- ( any other suitable 0.5 for
example for each ) heading + 0.5
1. Read trends for example
They regularly read the leading publications and websites affecting
their business. 1x4=4

2. Talk trends
Talking to people is an equally important trend-spotting tactic. They
get involved in specific industry’s trade association and attending
events both online and offline.

3. Watch trends
There’s no substitute for getting out in the market place. They make it
a point to regularly go where their target customers hang out. If the
customers are teenagers, that might be the local mall.

4. Think trends
As an entrepreneur begins gathering all these information regularly,
they will start to develop a ‘trend-spotter mind’.

[13]

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)

Q.31 Explain with the help of any four points the advantages of franchising to 4
the franchisee.

Ans. Advantages of franchising to the franchisee:- 0.5 for
1.Product acceptance: The franchisee usually enters into a business identification
that has an accepted name, product or service. + 0.5 for
explanation
2. Management expertise: Once the franchise has been started, most
franchisors will offer managerial assistance on the basis of need. Toll- 1x4=4
free numbers are also available so that the franchisee can ask
questions anytime.

3. Capital requirements: The layout of the facility, control of stock and
inventory and the potential buying power of the entire franchise
operation can save the entrepreneur significant funds.

4. Knowledge of the market: Any established franchise business offers
the entrepreneur years of experience in the business and knowledge of
the market which is usually reflected in a plan offered to the franchisee
that details the profile of the target customer and the strategies that
should be implemented once the operation has begun.

5. Operating and structural controls: Administrative controls
unusually involve financial decisions related to costs, inventory and
cash flow and personnel issues such as criteria for hiring/firing,
scheduling and training to ensure consistent service to the customer.

(ANY FOUR)
( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)
OR
Explain Internal expansion and External expansion as part of growth and 4
development of an Enterprise.

[14]

Internal expansion results from the gradual increase in the activities of 2+2=4
the concern. The concern may expand its present production capacity
by adding more machines or by replacing old machines with the new
machines with higher productive capacity.

External expansion or business combination refers to business
combination where two or more concerns combine and expand their
business activities. External expansion may be in the following forms:
a) Franchising
b) Mergers
c)Acquisitions
Q.32 ‘Flavouright Foods Ltd.’ Started a business of making nachos (corn chips) 4
in three variants, Classic Cheese, Toasted Corn and Tangy Tomato. To
start with, all the three variants will be sold in a standard packing of 100
gms each, the selling price would differ due to the ingredients used. Fixed
costs are 38,000
Sales price and variable costs per unit are as follows:
Particulars Classic Cheese Toasted Corn Tangy Tomato
Sales Price Rs. 80 45 60
Variable Cost Rs. 40 15 20
Packets sold 100 40 60
From the above information calculate :
(a) Weighted contribution margin per unit.
(b) Breakeven point – total and per product.
Classic cheese Toasted Corn Tangy Tomato 1 mark for
Sales price (Rs.) 80 45 60 formula +1
mark for
Variable Cost 40 15 20 weighted
(Rs.) contribution
Contribution 40 30 40 +1 mark for
Margin (Rs.) B.E.P for
Packets Sold 100=50% 40=20% 60=30% total units +
(sales Mix %) 1 mark for
Contribution 20 6 12 B.E.P per
Margin in product =4
relation to sales
mix

Weighted Contribution Margin = 20+6+12 = (Rs.) 38

𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇𝒇 𝒄𝒄𝒄𝒄𝒄𝒄𝒄𝒄
Break Even Point (BEP)=
𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘𝒘 𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪𝑪 𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎𝒎

𝟑𝟑𝟑𝟑𝟑𝟑𝟑𝟑𝟑𝟑
=
𝟑𝟑𝟑𝟑

[15]

= 1000 Units
BEP per product:

Classic cheese Toasted Corn Tangy Tomato

1000 X 50% =500 1000 X 20% =200 1000 X 30% =300

SECTION E
Q.33 While preparing an operational plan, an entrepreneur has to pay attention 6
towards various elements. Explain these elements.
Ans. Elements of operational plan: 0.5 for
heading +0.5
1) Routing: It is a process concerned with determining exact route or for
path a product/ service has to follow right from raw material till its explanation
transformation into finished product. 1x6=6
2) Scheduling: It means fixation of time, day, date when each
operation is to be commenced and completed. In general, it is
determination of the time that should be required to perform each
operation.
3) Dispatching: The process of initiating production in accordance
with pre-conceived production plan is said to be dispatching.
4) Follow-Up: It relates to evaluation and appraisal of work
performed. A properly planned follow-up procedure is helpful in
dispatching errors and defects in the work.
5) Inspection: It is the art of comparing materials, product or
performance with established standards. This element helps the
entrepreneur to set up laboratories or evolve strategies/methods to
ensure predetermined quality of product/service.
6) Shipping: It describes the flow of goods/ services from production to
the consumers.

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)

OR
Explain the steps for idea and opportunity assessment after the product 6
identification has been done by the entrepreneur.
Ans. After identification of product following are the steps to be followed 0.5 for
by the entrepreneur for idea and opportunity assessment:- heading +0.5
for
1. Application and use: Ideas should be examined for their real life use explanation
and application. If it already exists in the market, we will have to find
out its present use, then we may think of modifying it for better use. 1x6=6

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2. Level of operation: This is a crucial test for product/service
identification. Depending on the use of the product/service the
entrepreneur will produce it in a cottage industry or a small scale–
industry or a large–scale industry.

3. Cost: What is per unit cost of the product at particular level of
operation? Whether this cost is comparable with that of other
competitive products? These are some of the questions that have to be
answered. This will ultimately decide the sale price.

4. Competition: Any product or service will face market competition at
some stage. So market competition should be assessed through a study
of the trends in demand and supply.

5. Technical complexity: What type of technology is required to
produce the product? Whether training and application of such
technology will be locally available or will it have to be supported from
other places? What would be the position of supply of plant and
machinery for such a technology? These are important issues that have
to be resolved.

6. Annual turnover and profit margin: Ideas should also have to be
examined on the basis of expected annual turnover. This will also
indicate the market share of the product or service.

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)
Q.34 Explain any six reasons for the failure of mergers and acquisitions. 6
Ans. Reasons for failure of merger and acquisitions:- 0.5 for
1. Unrealistic price paid for target : The process of M&A involves heading +0.5
valuation of the target company and paying a price for taking over the for
assets of the company. explanation

2. Difficulties in cultural integration : there may be acute contrasts 1x6=6
between the attitudes and values of the two companies, especially if the
new partnership crosses national boundaries.
3. Overstated synergies
Mergers and acquisitions are looked upon as an important instrument
for creating synergies through increased revenue, reduced costs and
reduction in networking capital and improvement in the investment
intensity. Overestimation for these can lead to failure of mergers.

4. Integration difficulties: Companies very often face integration
difficulties, i.e., the combined entity have to adapt to a new set of
challenges given by the changed circumstances.

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5. Poor business fit: Mergers and acquisitions also fail when the
products or services of the merging entities do not naturally fit into the
acquirer's overall business plan. This delays efficient and effective
integration and causes failure.
6. Inadequate due diligence: It helps in detecting financial and
business risks that the acquirer inherits from the target company.
Inaccurate estimation of the related risk can result in failure of the
merger.

7. High leverage: To pay the price of acquisition, the acquirer may
borrow heavily from the market. This creates a very high leveraged
structure and increases the interest burden of the company.

8. Boardroom split: When a merger is planned, it is crucial to evaluate
the composition of the boardroom and compatibility of the directors.
Managers or directors who are suddenly deprived of authority can be
particularly bitter.

9. Regulatory issues : The entire process of merger requires legal
approvals. If any of the stakeholders are not in favour of the merger,
they might create legal obstacles and slow down the entire process.

10. Human resources issues
A merger or acquisition is identified with job losses, restructuring and
the imposition of a new corporate culture and identity. This can create
uncertainty, anxiety and resentment among the company's employees.

(ANY SIX )

( If an examinee has not given the headings as above but has given the
correct explanation, full credit should be given)

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