Question Paper 1.

Entrepreneurship

A Sample Question Paper for CBSE Class XII

Time : 3 hrs Max. Marks : 70

General Instructions

1. All the questions are compulsory.

2. Marks are indicated against each question.

3. Questions No. 1 to 5 are very short answer type questions,

carrying questions should not exceed 15 words.

4. Questions No, 6 to 10 are short answer type questions,

carrying 2 questions should not exceed 50 words.

5. Questions No. 11 to 17 are long answer (LA-1) type

questions, carrying 3 marks each. Answer to each of these
questions should not exceed 75 words.

6. Questions No. 18 to 21 are long answer (LA-2) type

questions, carrying 4 marks each. Answer to each of these
questions should not exceed 150 words.

7. Questions No. 22 to 24 are essay type questions, carrying

6 marks each. Answer to each of these questions should not
exceed 250 words.

1. Give any two benefits enjoyed by a private company as

opposed to a public company. (1)

2. When does a sole proprietor requires to get himself

registered for service tax? (1)

3. Define the term environment scanning. (1)

4. Rohit, an entrepreneur, decided to open a chain of retail
stores to sell fast-food items like pizza, burgers, etc. He decided
to open the retail stores in the urban areas. Explain the
environmental factor which he should consider before taking the
decision. (1)

5. Badriswaroop is an unemployed youth of the village of

Kishan Gunj. He wants to open a cottage industry in his village
related to pottery. Which specialised financial institution should
he approach to meet the capital requirements of his industry? (1)

6. Differentiate between trademark and brand mark. (2)

7. Business Plan is an important tool for procuring funds. How?

(2)

8. While doing the manpower planning, an entrepreneur,

decides to keep less qualified manpower and give them low
wages and salaries to enable higher profits. Do you think his/her
approach is correct and justified, why? Which values are
neglected by him? (2)

9. Ramsaran, an auto-mechanic, was working in a city. But due

to ill health of his parents he, was compelled to shift to his village.
The village was approximately 2 km away from the nearest
highway. He noticed that vehicles which broke down had no
repair facility in that area. This gave him an idea to open a Auto-
Service-Centre for earning his livelihood. He motivated some
young boys of his village to join him for providing this service. He
trained them and employed them in his workshop. Basic ideas
emerge from different sources. (

i) Identify the category of source under from which Ramsaran's

idea emerged.

(ii) State any one other category from where basic ideas emerge.
(2)
9. The business assets of an organisation amount to Z 2,50,000
and its unpaid liabilities Z 3,00,000. What are the alternatives
available to the creditors, if:

(I) the organisation is a sole proprietorship firm.

(ii) the organisation is a partnership firm with Raghu and Rahul

as partners. (2)

10. Explain with example how 'existing products or services'

help in generation of ideas. (3)

12. Deepika wanted to pitch in to reduce the financial crisis

prevailing in her house and thought of working as a cook. She
started working in three different households, one Punjabi, one
Gujarati and one South Indian family. She soon realised that all
the three households had different cuisine. It was indeed a
challenge for her to learn the techniques of the cuisine. All the
families greatly appreciated the time frame within, which she
had mastered the local cuisine. After working for them for a year,
she decides to open a small eating joint of her own along with two
of her friends by the name 'Apna Bhojr. They decided to share
profits equally and that each of them will be liable for acts
performed by the other two. Soon the eatery became a hot spot
because of the fusion platter, which was being offered. (3)

(1) Identify the kind of business organisation which was set-up

by Deepika and her friends.

(ii) Quoting the lines from the paragraph, state the features of
this form of business organisation.

13. 'Business goals need to be achievable stretches. Why? (3)

14. How stock options lead to enable employees to become

shareholders and share the profits of the company? (3)

15. A stationery shop sells 25,000 copies per year. The cost
price of the copy is Z 20 per copy and carrying cost is 20% of the
cost price. Cost of placing an order is Z 20. Calculate the Ma for
copies for the stationery shop. (3)

16. Mr Dinesh has just retired from a government job and was
looking for an investment option in the IT sector. He was
approached by Mr Divij for funds for investment in his new
venture as venture capitalist. But, Mr Dinesh declined saying that
venture capitalist's investment are not liquid. Is Mr Dinesh's
apprehension valid? Give reasons for your answer. (3)

17. Vimal Limited Corporation were earlier producing pencils,

now they have decided to further venture into the field of
notebooks and paper. What do you think the company is
attempting to do? Identify and explain the concept. (3)

18. Explain creative process. (4)

19. Suppose you have to introduce a new toilet soap in the

market, what micro environmental factors you will take into
account? (4)

20. A beauty parlour had varying number of customers during 5

weeks. This information and the total weekly billing are in the
following table. What are the 'unit of sale' and the 'unit price' in
this case? If the cost of goods sold or variable cost is 60% of the
sale price, calculate the 'unit cost' and the 'gross margin' per unit
of sales. (4)

Weeks Number of Total amount Average

Customers billed(Rs) amount billed
(Rs) Per
customer
Week 1 10 1000 100
Week 2 17 1445 85
Week 3 13 923 71
Week 4 22 5082 231
Week 5 18 3150 175
Total 80 11600
21. Pawan's father has been running a roadside restaurant for
past 15 years. After his graduation, Pawan instead of looking out
for jobs, decided to venture into his father's business. He decided
to upgrade his restaurant to a franchise of a popular restaurant
1Satyamf. His father was against his decision, but Pawan satisfied
him by quoting some of the advantages of this decision for them.
What advantages would have been enumerated by Pawan to his
father? Discuss them. What value is exhibited by Pawan by not
opting for employment? (4)

22. Comment on the following diagram. (6)

Idea

Market Successful
Venture

Opportunity

Entrepreneur

23. A factory is engaged in manufacturing plastic buckets. The

following information is available to you: Sales = 1,00,000

Direct labour cost (1,000 units) 10,000

Direct material cost (1,000 units) --- 25,000

Direct expenses (1,000 units) 5,000

Fixed cost = 30,000

Find out

(I) Variable cost per unit

(ii) Total cost

(iii) Break-even point Also show how at break-even revenue is
equal to total cost. (6)

24. Varshini started her high-end boutique in a posh locality,

but she was not aware of how to make her boutique popular in
the area. Suggest some measures for it. Also give any four
activities of the suitable technique. (6)

ANSWERS

1. The benefits enjoyed by a private company are as follows:

(I) Only 2 members are required to form a private company.
(ii) Private company can commence business immediately,
after receiving Certificate of Incorporation.

2. A sole proprietor is required to fill form ST 1 for service tax

registration, if the taxable services provided by him exceed
?10 lakh for a financial year.

3. 3. Scanning of environment can be defined as a close

examination of the environment to develop an
understanding of the socio-cultural, economic, political and
other development factors in order to ensure that the
perceived entrepreneurial opportunity is compatible with
them.

4. 4. The environmental factor which he should consider is the

socio-cultural factor. It involves a close study of the life
styles, beliefs, customs, conventions, practices, etc.
Expectation of individuals, their preferences on the basis of
 their family background and their education level also form
a part of this study.

5. Badriswaroop should approach National Bank for

Agriculture and Rural Development (NABARD) in order to
meet capital requirements for the cottage industry, which
he wants to open in his village.
6. Differences between trademark and brand mark are:

Basis Trademark Brand Mark

Meaning A brand or a part of A brand mark that
a brand that is given part of a brand ;.},...,
legal protection 1411inot he
against its use by npnken. brit can ice
other firms is called recorinil:ied it
a trademark. It appear;.; Sri the
confers upon its form of a r,ymbol,
owner the exclusive design or ditInct
right to use the colour scheme
brand name and
brand mark
Concept It is a narrow it is a broader
concept, as it is a concept, as It
brand mark that is includes trademark
given legal
protection
Example Goledn M is the 'Maharaja' of Air
Trade mark of India the brand
McDonalds mark.

7. Business Plan informs an investor about the entrepreneur's

credit history, his ability to make payments against debt and
interest and the amount of equity invested by him. So, a Business
Plan helps a business to raise funds by providing the relevant
information about the 4 CsCharacter, Cash flow, Collateral and
Contribution towards equity.

8. No, i don't think his/her approach is correct and justified

because of the below mentioned reasons:

(I) The product quality is likely to suffer because of less qualified

manpower.

(ii) Although, the entrepreneurs plan might lead to short-term

profits, it is bound to give negative returns in the long run as
consumers become aware of the poor quality of the product and
switch to competitor's product. The values neglected by him are
as follows: (1) Social responsibility. (ii) Care and concern
towards consumers.

9.

(I) The category of source from which Ramsaran's idea emerged

is 'problem'. Many a times, a solution to a problem leads to idea-
generation.

(ii) One other category from where basic ideas can emerge is
Change. Any change in social, legal or technological aspects lead
to a new business opportunity.

10.

(1) In case of sole proprietorship, the creditors can claim the

personal property of the sole proprietor to recover the deficiency
of 50,000.

(ii) In case of partnership, the personal assets of both the

partners or either one of the partner could be used to recover the
deficiency.

11. Existing products and services can generate a number of

ideas to improve them or to provide a cheaper substitute or to
bring about a reduction in price. It can also help in deciding
whether similar products can be established, whether new
products can work on raw material for existing units, whether
new products can be developed from the waste generated from
existing product, etc., e.g. in an area where a perfume unit is
functioning, there is scope for growing and supplying aromatic
plants.

12. (i) The kind of business organisation which was set-up by

Deepika and her friends is 'Partnership'.

(ii) The features of this form of organisation as indicated by the

passage are: (a) Sharing of profits (b) Mutual agency The lines
from the passage which are indicative of the above features are
as follows:

"They decided to share profits equally and that each of them will
be liable for acts performed by the other two".

13. 'Business goals needs to be achievable stretches' because of

the following reasons:

(1) If the goal is set too high, then for fear of failure, no one will
try to achieve it.

(ii) If it is set too low, then no one will bother to do it for lack of
satisfaction and recognition. So, business goals should be worth
pursuing and so set that one is motivated to achieve them.

14. Employee Stock Option Scheme (ESOS) is an option provided

to the employees to buy company's share, mostly at a preferential
price which is less than the market price.

By opting to buy the stock option, the employees become

shareholders of the company and become entitled to share the
future profits of the company. ESOS is offered to employees to
increase their motivation leve and to retain them in the company.
15. Economic Order Quantity (EOQ) = SQRT(2AP/C)

-where, A Annual requirement in units = 25,000

P = Cost of placing an order =Rs 20

C =Carrying cost per unit =20 x20%=Rs4

So, EOQ = SQRT((2 x 25,00x20)/4) = 500 copies

16. Yes, Mr Dinesh's apprehension is valid as a venture

capitalist's investment is highly illiquid because of the below
mentioned reasons: (i) Venture capitalists generally invest in
equity of a new company. (ii) This company is yet to make a
standing in the secondary market. (iii) Because of this, the
company's shares are not demanded in stock liquidity.

17. Vimal Limited Corporation is attempting to expand internally.

Internal expansion results from the gradual increase in the
activities of the concern. A firm may expand internally by adding
more machines, upgrading its technologies, increasing
production or entering nev. fields on the production or
marketing sides. Interna: expansion is usually financed through
long-term source, of finance or through ploughing back of profits.
Interna: expansion leads to an increase in business activities and
also broadens the present capital structure.

18.

Creativity is the first step in the process of innovation, which

provides the entrepreneurs stimulus for opportunity, discovery
and creation of new ventures. The creative process involves five
steps, which are a,. follows:

exchanges, giving it poor

(1)

Idea germination It is the seedling stage, where the ideas grow

and the entrepreneur recognises the opportunity. Idea
germination can take place due to interest and curiosity of the
entrepreneur. It can also be due to specific area of study or
problems.

(ii) Preparation On the basis of idea germination, the

entrepreneur starts looking for a solution to implement the idea.
For this, he takes up market research to check for the future
potential of the nee; product or service.

(iii) Incubation This is the subconscious assimilation, i.e_ the

absorption of new ideas into an existing cognitive structure. In
this stage, he/she understands the pros and cons of
manufacturing the product before he/she had launched it.

(iv) Illumination The idea re-surfaces in a realistic way and the

entrepreneur comes up with viable plan. To give it a practical
shape, he/she arranges for various resources.

(v) Verification This is also known as the validation or testing

stage. This is where the idea is verified to prove that it is of value.
This is the most difficult phase as the obstacles begin to appear at
this stage.

19. Before introducing a new toilet soap in the market the micro
environmental factors to be considered are as follows:

(a) Competitors Who are the existing or potential competitors,

their price, quality, etc.

(b) Customers Who will be the target market, whether it is for

premium users, poor or for middle class. The soap can be for
females, babies, skin problem users, etc.

(c) Suppliers Whether the raw material to be used have enough

suppliers.
(d) Intermediaries Who can be tie up with for marketing,
transporting, warehousing, financing, etc.

(e) Public Can some public interfere with the product being
manufactured.

20. Unit of sale in this case is 'customer'.

Unit Price = Total Billed Amount /Number of Customers

=11,600/80 =Rs145 80

Unit Cost = 60% of Unit Price =60% of 145 =Rs 87

Gross Margin Per Unit of Sale = Unit Price Unit Cost =145 87
= 58

21. As Pawan decided to become a franchisee of a popular

restaurant 'Satyam'. Then, their business would have many
advantages which he explained to his father are discussed below.
Advantages of a Franchise for a Franchisee are as follows:

(i) Product acceptance The franchisee usually enters into a

business that has an accepted name, product or service.

(ii) Management expertise The franchisor provides managerial

assistance related to all aspects of operating the franchise to the
franchisee.

(iii) Capital requirements Franchise agreements offer an

opportunity to start a new venture with up-front support from
franchisor, which saves considerable time and capital of the
franchisee.

(iv) Knowledge of the market Franchisors are well aware of the

existing market conditions. With their experience and
knowledge, they can provide advice and assistance to the
franchisees for carving out a market for themselves. Following is
the value exhibited by Pawan: Helps in solving the
unemployment problem of the country by becoming a job-
provider instead of job-seeker.

22. The given diagram depcits that there are innumerable ideas
present and spotted by an entrepreneur. The basic ideas may
emerge from problems, changes in the environment, inventions,
competition and innovations taking place. An entrepreneur
through his vision and creativity, identify an idea to generate a
solution to a problem. This solution is converted into an
opportunity. Here what is important, is that, the ideas have to
assessed in terms of its potentiality of the opportunity. Thus,
investigation of ideas has to be done for opportunity assessment.

Idea and opportunity assessment Steps are as follows:

(1) Product identification

(2) Application and use
(3) Level of operation
(4) Cost
(5) Competition
(6) Technical complexity
(7) Annual turnover and assessment Finally, market
assessment in terms of demand of the product, supply and
nature competition, cost and price of the product and
prevailing product innovations have to be done to move
into a direction of setting up of successful venture.

23. Total Variable Cost = Direct Labour Cost + Direct Material

Cost + Direct Expenses -10,000 + 25,000 + 5,000 = 40,000

(i) Variable Cost Per Unit Total Variable Cost40 000 = ' 40
Number of Units 1,000

(ii) Total Cost = Total Variable Cost + Fixed Cost = 40,000 +

30,000 = 70,000
(iii) Break-even Point =Fixed Cost V Ratio P/V Ratio Sales
Total Variable Cost Sales 1,00,000 40,000 = 0.6 1,00,000

Break-even Point (in rupees) = 3Q'000 50,000 0.6 Break-even

Point (in enits) = 5000000 = 500 units 1 Total revenue at 500
units =500 x100 = 50,000

Total Cost = Fixed Cost + [Variable Cost Per Unit x Bleak-even

Point (in units)

=30,000 + (40 x500) =30,000 + 20,000 =50,000

So, it is verified that at Break-even point, total revenue equals

total cost.

24. Varshini has started a high-end boutique in a posh locality.

So, her target customers are rich and affluent people. So, Below
The Line (BTL) promotional activities will be suitable for her,
which include: (i) Sponsorships (ii) Sales promotion techniques
(iii) Building public relations (iv) Personal selling (v) Direct
marketing Since, Varshini deals in providing designer clothes, so
sales promotion techniques would be best suited for her.
The four activities of sales promotion technique are as
follows: (i) Consumer Promotions The promotion activities
directed towards the final consumers are referred to as
consumer promotions activities. important sales promotion
activities of this segment are as follows:

(a) Point of purchase display material which include: Dangler A

sign that sways when a customer walks by. Dump bin A bin full
of products dumped inside. Lipstick board A board on which
messages are written with crayons. Necker A coupon placed on
the neck of the bottle, etc.

(b) In store demonstrations, samplings and celebrity

appearances.

(c) Competitions, coupons, sweepstakes and games.