CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 3 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Time : 3 Hours
Maximum Marks: 70

General Instructions:

  • This question paper contains 34 questions.
  • The question paper contains 4 sections – A, B, C, and D.
  • Part A contains multiple-choice questions.
  • Part B – 2 marks; Answers to these questions may be from 30-40 words.
  • Part C – 3 marks; Answers to these questions may be from 50-75 words.
  • Part D – 5 marks; Answers to these questions may be from 120-150.
  • Internal choice is given in the paper, there is no overall choke.


Question 1.
Information for environment scanning can be called from various sources. Identify from the following which one is not a source of environmental scanning: [1](A) Records of compares
(B) Government publications
(C) Publications by various financial institutions
(D) Creative efforts
Option (D) is correct.
Explanation: Creative solutions to the society’s problems is a major business idea field. Finding new uses of a product or a new market or a new method consists of creative efforts. It does not form a source of environmental scanning.

Question 2.
Mayank, a small entrepreneur, is manufacturing LED lamps with the brand name led-amps’. These lamps are in great demand. He finds that the cost of production per unit of the lamp is ₹ 800 and he can sell the same at ₹ 1,000 per lamp. The competitors in the market are selling this type of lamp at the rate of ₹ 1,200. Mayank’s objective is not to earn profit in the short-run but to capture the largest market share. His expectation is that the customers will be attracted towards the new brand because of the lower price. Identify the method of pricing adopted by Mayank to capture the substantial portion of the market. [1](A) Cost-plus Pricing
(B) Penetration Pricing
(C) Skimming Pricing
(D) Variable pricing
Option (B) is correct.
Explanation: Penetration pricing is a pricing strategy where a product or service is initially set at a low price to attract customers and gain a significant market share. It involves offering a lower price compared to competitors in order to enter the market and encourage customers to choose the new brand. In Mayank’s case, he is pricing his LED lamps at ₹ 1,000 per lamp, which is lower than the competitors’ price of ₹ 1,200. By offering a lower price, Mayank aims to attract customers to his brand, ‘led-amps,” and capture a larger market share.

Question 3.
Which amongst the following values would help an entrepreneur to determine the Return on Investment: [1](i) Net profit
(ii) Gross profit
(iii) Inventory carrying cost per unit
(iv) Total capital invested
(v) Weighted average contribution
(A) (ii), (iii), (v)
(B) (i), (iv)
(C) (i), (ii), (iii)
(D) (ii), (iii)
(B) (i), (iv)

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Question 4.
Prabhas is the creative head of an advertising agency. His latest protect is to design a campaign for super food for children in the age group of 6 months to 2 years. He developed a jingle in Hindi as well as in English language to reach out to the maximum audience of the market segment. By doing this, he is not only informing and selling the product but also improving the image of the business. When any advertising activity is planned, there are four rules to be considered. From the following, identify the rule/rules that are taken into, consideration by Prabhas in the above case: [1](i) Aim
(ii) Target
(iii) Media
(iv) Competitors.
(A) (i)
(B) (i) and (ii)
(C) (i), (ii) and (iii)
(D) (i), (ii) and (iv)
(B) (i) and (ii)
Explanation: Prabhas, as the creative head of an advertising agency, is responsible for designing a campaign for a superfood targeted at children in the age group of 6 months to 2 years. In order to effectively plan the advertising activity, he considers
the aim of the campaign, which is to inform and sell the product, as well as the target audience, which is the market segment of children in the specified age range. By developing a jingle in Hindi and English languages, Prabhas aims to reach out to the maximum audience and improve the image of the business. Hence, the rules of aim and target are taken into consideration in this case.

Question 5.
Exploring opportunities in the environment is a process involving various steps. Arrange the steps in correct order. [1](i) Evaluating the ideas received from different sources to find a creative solution
(ii) Identifying a product or service through innovation
(iii) Opportunity spotting by analysing the needs and problems that exist in the environment
(iv) Setting up a project and nurturing it to success
(A) (I), (ü), (iii), (iv)
(B) (iii), (i), (ii), (iv)
(C) (ii), (iii), (iv), (i)
(D) (i), (iv), (iii), (ii)
Option (B) is correct.
Explanation: The process of opportunity exploration begins with spotting the opportunity in the business environment. Then the entrepreneur evaluates the ideas to find creative solutions. Then the identification of product is done and finally, the project is set up or operation in the market.

Question 6.
Rushan devised an apparatus to measure the quality of air at home which 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-commercialisation 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: [1](A) Copyright
(B) Patent
(C) Industrial design
(D) Trademark
Option (B) is correct.
Explanation: Rushan’s invention of an apparatus to measure air quality and convert an air conditioner into an air purifier is a unique and innovative solution. To protect his invention and exclude others from making, using, selling, or importing the apparatus, Rushan will need to obtain a patent.

A patent is an intellectual property right granted to inventors, giving them exclusive rights to their invention for a limited period. It provides legal protection and prevents others from copying or using the invention without permission. Therefore, Rushan will have to obtain a patent to safeguard his invention.

Question 7.
A grocery owner has an equity stake of ₹ 40,000/- in the business. He has borrowed ₹ 60,000/- at the interest rate of 10% per annum. He made a net profit of ₹ 20,000/- in one year. What will be the Return on Equity for the grocery owner? [1](A) 20%
(B) 30%
(C) 35%
(D) 50%
Option (D) is correct.
Explanation: Return on Equity = \(\frac{\text { Net Income }}{\text { Equity }} \) × 100
= \(\frac{₹ 20,000}{₹ 40,000} \times 100\) = 50%

Question 8.
What is common among Mcdonald’s, Golivada pav, Naturals Ice-creams and Ferns-and-petals? [1](A) All are Multinational corporations working in India.
(B) All have adopted franchising as their growth strategy.
(C) All have merged with big companies.
(D) All of the above.
Option (B) is correct.
Explanation: All of these are following the franchise model. Franchising is as an arrangement in which the manufacturer or sole distributor of a trademarked product or service gives exclusive rights of local distribution to independent retailers in return for
their payment of royalties and conformance to standardized operating procedures.

Question 9.
Nishtha, a professionally qualified entrepreneur, decided to start ‘kids furniture’ a website of designer furniture. It was relatively an untried area involving high risk. She lacked the necessary funds and experience to give shape to her idea. She knew that if she failed to get investment from the public her idea would die down before it is tried. So, she made a detailed business plan and presented her idea to ‘FiFa Finance Ltd.,’ a company run by a group of professional investors. They were impressed by her business plan and decided to fund her start-up in exchange for an equity stake in the business. The source of finance used by Nishiha is: [1](A) Angel investor
(B) Venture capitalist
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Option (B) is correct.
Explanation: In the given scenario, Nishtha approached ‘FiFa Finance Ltd.’ for investment in her start-up. ‘RFa Finance Ltd.’ is described as a company run by a group of professional investors, indicating that they are venture capitalists. Venture
capitalists are firms or individuals who provide funding to start-up businesses in exchange for equity ownership or a share of the company. They typically invest in high-risk, high-potential ventures and actively participate in the management and growth of the business. Therefore, the source of finance used by Nishtha in this case is a venture capitalist.

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Question 10.
Assertion (A): Startup finance is the capital required by an entrepreneur for conducting research at pre commercialization stage.
Reason (R): After reading the business plan and consulting the entrepreneur, the investor decides that the idea is worth for further development. [1](A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Option (D) is correct. ,
Explanation: Seed capital finance is required for conducting the research before the actual product is manufactured. Startup finance is required at the later stage. The investor first goes through the business plan and then decides whether the idea is
worth further development or not.

Question 11.
According to the ‘PESTEL Model’, which factor emphasise the production of goods with minimum environmental damage? [1](A) Economic
(B) Social
(C) Ecological
(D) Technological
Option (C) is correct.
Explanation: Ecological factor considers the ways in which the organisation can produce its goods or services with minimum environmental damage.

Question 12.
Assertion (A): For a trading organization, the operating cycle will be shorter.
Reasoning (R): There is no manufacturing in a trading organisation. [1](A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Option (A) is correct.
Explanation: The operating cycle of a manufacturing concern is shorter because there is just exchange of goods and no manufacturing is involved.

Question 13.
Assertion (A): In franchising, there is usually a much higher likelihood of success when an individual opens a franchise as opposed to a mom-and-pop business.
Reason (R): It runs on a proven business formula that is already in place. [1](A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
Option (A) is correct.
Explanation: There is a likelihood of success in a franchising business as the products, services, and business operations have already been established.

Question 14.
Hemant approached his father seeking for his new venture. He had planned to start a computer assembling unit. Though his father was in a position to give him the money he still insisted that he should take a loan from the bank which will make him more responsible. When Hemant approached the bankers, they asked for a business plan. Hemant was not sure as to who can help him in preparation of the business plan. Who among the following can prepare the business plan: [1](A) Lawyers
(B) Accountants
(C) Marketing consultants
(D) All of the above
Option (D) is correct.
Explanation: The preparation of business plan draws knowledge from various disciplines which requires the entrepreneurs to consult with experts including the lawyer, accountants and marketing consultants.

Question 15.
Varun along with his friends had a brilliant idea to manufacture an air conditioner which will also act as an air purifier. The idea was new and the market did not have such a successful product. For starting the unit, they were in need of huge funds, so they decided to approach Shankar, a successful businessman and who is also a venture capitalist. However, Shankar said that he was very busy and if they could pitch their idea within a span of 3 minutes, he was ready to hear it. Which format of Business plan will Varun and his friends would have to use? [1](A) Elevator Pitch
(B) A pitch deck with oral narrative
(C) A written presentation for external stakeholders
(D) An internal operational plan
Option (A) is correct.
Explanation: An elevator pitch is a concise and compelling summary of a business idea or product that can be delivered within a short time frame. In this scenario, Varun and his friends need to quickly present their air conditioner with air purifying capabilities to Shankar, a venture capitalist, in just 3 minutes. Their elevator pitch must effectively communicate the unique value proposition, target market, competitive advantage, and market potential of their product. By delivering a compelling and concise pitch, they aim to capture Shankars interest and secure potential investment for their business venture.

Question 16.
Vinita, Bhavana, Rani and Nandini are all good friends in the age group of 15-17 years of age. All of them decided together to start a business venture of making soaps at home using natural ingredients. They decided to name their venture as ‘O&HM’ meaning Organic and Home Made. They spoke about their venture to their parents and asked them if their business could be registered so that it will be easy to divide the profits. Vinita suggested that they should register it as a Partnership firm. Can they form a partnership firm? [1](A) No, they cannot form a partnership firm since all of them are minors
(B) Yes, they can form a partnership firm
(C) No, since minimum number of people required to form a partnership is 10
(D) None of the above.
Option (A) is correct.
Explanation: According to the Indian Partnership Act, 1932, all partners in a partnership firm must be adults, which means they must be above the age of 18 years. Since Vinita, Bhavana, Rani, and Nandini are all in the age group of 15-17 years, they are considered minors and cannot legally form a partnership firm. Minors are not capable of entering into a valid partnership agreement, as they are not considered legally competent to enter into contracts. Therefore, they would not be able to register their business as a partnership firm.

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Question 17.
Arvind planned to start a small last-food joint in his area after finishing his degree in hospitality management His plan was to combine and use healthy ingredients like whole wheat flour to make the burger buns. He knew that he had to start collecting information from different sources which will help him to identify the right opportunity to start his business. From where will Arvind get the necessary information? [1](A) Magazines
(B) Shows
(C) Family Members
(D) All of the above.
Option (D) is correct.
Explanation: He can use all the sources- magazines, shows, and family members to collect the market information to start his business.

Question 18.
Varun, a student of class XII, observed that a large number of students of the school were using mobile phones. He also observed that many parents of such students were worried about the content being viewed by their children on mobile phones and were not able to control them. Being a talented and an intelligent student he decided to develop an app that may help the parents to watch and control children regarding the content being viewed. From the following identify the Idea field” used by Varun to develop the app: [1](A) Creative efforts
(B) Trading related ideas
(C) Market driven idea
(D) Natural resources
Option (A) is correct.
Explanation: Varun’s idea to develop an app that helps parents monitor and control the content viewed by their children on mobile phones involves creative efforts. He identified a problem faced by parents and came up with a solution in the form of
an app. This idea is driven by Varun’s creativity and innovative thinking, as he seeks to address a specific need in the market. It is not related to trading, market-driven ideas, or natural resources, but rather focuses on utilizing technology and creativity to
develop a useful application for parents.


Question 19.
Differentiate between consolidation and merger.
What do you understand by acquisition?
Consolidation refers to the process where two or more companies come together to form an entirely new entity. This involves the dissolution of the original companies, and a new organization is created. All assets, liabilities, and operations are transferred to the new entity.

A merger, on the other hand, is when two or more companies combine their operations into an existing entity in a merger, one of the participating companies continues to exist while the others cease to exist. The surviving entity absorbs the assets, liabilities, and operations of the merged companies.
Acquisition refers to the process of one company purchasing another company or a significant portion of its assets. It allows the acquiring company to gain control over the operations, resources, and market presence of the target company. Acquisitions can
provide benefits such as market expansion and product or service diversification.

Question 20.
“Successful launch of a product depends upon various factors. Entrepreneurs have to keep in mind the various ways of reaching the customers and persuading them to buy their products. Comment on any two such methods used by an entrepreneur in attracting the customer to buy their product. [2]Answer:
(i) Advertising: Advertising involves paid communication channels, such as television, radio, print, online platforms, and social media, to reach a wide audience and create product awareness. It allows entrepreneurs to showcase the unique features and benefits of their products, build brand identity, and influence consumer perceptions and purchase decisions.

(ii) Personal selling: Personal selling is a direct and interactive approach where entrepreneurs or sales representatives engage in one-on-one conversations with potential customers. It allows for a customized sales approach, addressing individual needs, building relationships, and establishing trust. Personal selling enables entrepreneurs to provide detailed product information, address customer concerns, and offer personalized solutions.

(iii) Sales promotion: Sales promotion involves short-term incentives or activities designed to stimulate immediate sales. Examples include discounts, coupons, limited-time offers, contests, and loyalty programs. Sales promotion techniques entice customers to make a purchase by feeling a sense of urgency, providing added value, or rewarding their loyalty, thereby boosting sales and attracting new customers.

(iv) Public relations: Public relations involves managing the public image and reputation of a company or product through various communication channels. Entrepreneurs use public relations strategies such as press releases, media relations, events, and sponsorships to generate positive publicity, enhance brand credibility, and establish relationships with the media and the public.

Question 21.
Varied reasons are cited by firms for joining hands with another company to enhance ther growth. Analyse any two reasons for the same. [2]OR
What is operating synergy? How is it different from financial synergy? [2]Answer:
(i) Synergy: Synergy refers to the combined effect of two companies working together that is greater than the sum of their individual efforts. By collaborating with another company, firms can create synergies by leveraging complementary strengths, resources, or capabilities. This can lead to increased operational efficiency, cost savings, and enhanced competitiveness in the market.

(ii) Acquiring new technology: In today’s rapidly evolving business landscape, staying ahead in terms of technology is crucial for sustained growth. Companies may seek partnerships or acquisitions to gain access to new technologies or intellectual property that can give them a competitive edge. This allows them to enhance their product offerings, improve operational processes, or enter new markets with innovative solutions.

(iii) Improved profitability: Partnership or collaboration with another company can lead to improved profitability through various means. By combining resources and sharing costs, companies can achieve economies of scale and reduce expenses. Additionally, collaborations can lead to increased sales, market share, and revenue generation, ultimately contributing to improved profitability.

Acquiring a competency: Sometimes, a company may lack certain expertise or capabilities necessary for growth. By joining
forces with another company that possesses the desired competency, firms can acquire new skills, knowledge, or talent. This can strengthen their overall business operations, improve product development, or expand into new areas, enabling sustainable growth.

(v) Entry into new markets: Companies often seek partnerships or collaborations to enter new markets or expand their geographical presence. Partnering with a local company that has established market knowledge, distribution networks, and customer relationships can provide a faster and more effective entry into unfamiliar markets. This strategy allows companies to diversify their customer base, increase market reach, and capture growth opportunities.

(vi) Access to funds: Collaborating with another company can provide access to additional funds or financial resources. This can be particularly beneficial for startups or smaller firms that may face challenges in raising capital independently. Joint ventures, strategic alliances, or mergers can bring in new investors, access to capital markets, or shared funding for research and development, enabling companies to fuel their growth ambitions.

(vii) Tax benefits: Sometimes, companies consider strategic partnerships or mergers for potential tax advantages. Mergers or acquisitions may provide opportunities for tax optimization, such as through favourable tax structures, loss utilization, or international tax planning. By leveraging tax benefits, companies can enhance their financial position, increase cash flows, and
improve overall profitability.
Operating synergy refers to the cost savings that come through economies of scale or increased sales and profits. It leads to the overall growth of the firm. Financial synergy is the direct result of financial factors such as lower taxes, higher debt capacity or
better use of idle cash.

Question 22.
After completing her B.tech in textile designing, Maya aspires to establish her own manufacturing unit for ready-made garments. Specifically targeting trendy clothing for infants under one year old, she sought the assistance of a renowned trendspotter to guide her. However, the trendspotter requested a hefty fee of ₹ 2,00,000, leading Maya to choose an alternative approach. She resolved to conduct trend spotting herself, primarily by engaging in conversations with parents of newborns. Describe the method Maya employed to effectively spot the trend in this context. [2]Answer:
Talk Trends: Talking to people is an equally important trend-spotting activity which helps the entrepreneur to get inputs on the needs of the customer. This can be done both online and offline.

Question 23.
Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know how to enter into the agreement. Therefore, they approached a chartered accountant who Advised them to prepare a document which may stipulate the terms and consolidation of the agreement. Name the document about which the chartered accountant advised Mohan and Radha. Also state any four important items they should include in the agreement besides the name, nature and place of business. [2]Answer:
Partnership Deed Contents of the deed:

  • Amount of capital to be contributed by each partner.
  • Profit-sharing ratio between the partners.
  • Loans and advances from the partners and the rate of interest thereon.
  • Drawings allowed to the partners and the rate of interest thereon.
  • Amount of salary and commission, if any, payable to the partners.
  • Duties, powers, and obligations of partners.
  • Maintenance of accounts and arrangement for their audit.
  • Mode of valuation of goodwill in the event of admission, retirement, and death of a partner.
  • Settlement of accounts in the case of dissolution of the firm.
  • Arbitration in case of disputes among the partners.
  • Arrangements in case a partner becomes insolvent.

Question 24.
Following are the balances of current assets and current liabilities of X Ltd.: Cash – ₹ 20,000; outstanding expenses ₹ 5,000; Creditors- ₹ 15,000; Debtors-₹ 50,000; Short term loans-₹ 4,000; Short term investments – ₹ 30,000; Long term loans- ₹ 1,00,000; Stock- ₹ 70,000. Calculate the gross and net working capital of X Ltd. [2]OR
Pink & Blue Stores sells 1000 insulated water bottles annually. Demand for the product is uniform. Purchase Cost per bottle is Rs.50. Holding cost per annum is 10% of purchase cost. Ordering cost is Rs. 1oo per order. Calculate the Economic Ordering Quantity for bottles? [2]Answer:
Gross Working capital = Sum total of all Current Assets
= Cash + Debtors + Short term investment + Stock
= ₹ 20,000 + ₹ 50,000 + ₹ 30,000 + ₹ 70,000 = ₹ 1,70,000
Net working capital = Current Assets-Current Liabilities
Current Liabilities = Outstanding expenses + Creditors + Short-term loans
= ₹ 5,000 + ₹ 15,000 + ₹ 4,000 = ₹ 24,000
Net working capital = ₹ 1,70,000 – ₹ 24,000 = ₹ 1,46,000
Economic Ordeng Quantity = \(\sqrt{\frac{2 P D}{C}}\)
Thus as Annual demand (D) = 1,000 bottles
Order cost (P) = ₹ 100
Annual carrying cost of 1 unit (C/i)
= 10% x ₹ 50 = ₹ 5
EOQ= \(\sqrt{\frac{2 \times ₹ 100 \times 1,000}{₹ 5}}\) = 200 units

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions


Question 25.
Advertising through television is favourable to big enterprises. But indirectly it affects small emerging entrepreneurs. Do you agree? Justify your answer. [3]Answer:
Advertising generally means communicating the message of manufacturer or advertiser to the consumers. By advertising producer gives a detailed information about the product. The big enterprise invests huge amounts of capital and produces in large scale with severe competition in the market. For all these advertising is essential to attract the customer towards their product. Advertising through television is costly but it is easily affordable by big enterprises.

Question 26.
When is it advisable for an entrepreneur to opt for a direct channel of distribution? [3]Answer:
It is advisable for an entrepreneur to opt for a direct channel of distribution in the following cases:

  • Where the producer or entrepreneur wants to have full control over distribution.
  • When an entrepreneur wants to deal directly with the consumers.
  • To cut distribution costs.

Question 27.
An entrepreneur may need the venture capitalist in the second stage of financing or as a source of bridge financing but he should always go in for a due diligence before opting venture capital as a source of finance. Comment on the given statement from the perspective of an entrepreneur. [3]OR
The level of sales to the level of revenue generated is a useful parameter for mapping an organizations present and future course of action. Justify. [3]Answer:
(i) An entrepreneur’s business is typically confidential and proprietary. Most venture capitalists will require significant details
with respect to a company’s business plan. Entrepreneurs must remain vigilant about sharing information with venture capitalists that are investors in their competitors.

(ii) Most venture capitalists treat information confidentially, but as a matter of business practice, they do not typically enter into non-disclosure agreements because of the potential liability issues those agreements entail.

(iii) Entrepreneurs are typically well-advised to protect truly proprietary intellectual property.

  • It helps in setting sales targets.
  • It helps in fixing the selling price and the profit goal.
  • In a manufacturing environment, it helps in determining the products that are not contributing to meet the fixed expenses and thus brings up the item for discussion in management meetings about its continuity.

Question 28.
Explain how the following factors affect idea and opportunity assessment:
(i) Application and use
(ii) Level of operation
(iii) Competition [3]OR
What will be the effect on Production Plan in the following situations;
(i) When there is no manufacturing
(ii) When there is partial manufacturing
(iii) When there is complete manufacturing. [3]Answer:
(i) Application and use: Ideas should be examined for their real-life use and application. If it already exists in the market, we will have to find out its present use, and then we may think of modifying it for better use. In the above-mentioned example, we can dearly see that even though there are many companies manufacturing pen drives, the latest will be in consonance with the
upcoming trends.

(ii) 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.

(iii) 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.
(i) No manufacturing involved: If the new venture does not include any manufacturing function, say it’s a trading firm or a service provider, then this section will stand eliminated from the plan.

(ii) Partial manufacturing: If some or all the manufacturing process is to be subcontracted or outsourced, then the production plan should describe:

  • Name and location of subcontractor(s)
  • Reasons for their selection
  • Cost and time involved
  • Any contracts that have been completed, etc.

In such cases, a clear mention of what entrepreneur intends to do himself and what he plans to get it done from outside is required.

(iii) Complete Manufacturing: If the manufacturing is to be carried out in whole by the entrepreneur, he/she will need to describe:

  • The physical plant layout,
  • The machinery and equipment required to perform the manufacturing operations,
  • Raw materials and suppliers names, addresses, terms and conditions,
  • Cost of manufacturing
  • Any future capital equipment required, etc.

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Question 29.
Deepak and Gaurav joined the prestigious law university in Ahmedabad in the year 2010. During the course of study they became good friends and they both realized that their common interest lies in the field of corporate law. After completion of their degree, they decided to start a firm of their own, namely ‘Corpo Law Firm’ where in both of them will be co-owners dividing the profit and loss. After successfully running the firm for a year, they realized that there are certain rights which are denied to their firm as it is not registered. Explain the consequences of non-registration of their firm. [3]Answer:
Consequences of non-registration of a partnership firm:

  • A partner cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
  • A right arising from a contract cannot be enforced in any court by or on behalf of the firm against the third party.
  • The firm or any of its partners cannot claim a set-off or other proceedings in a dispute with a third party.


Question 30.
What is a franchise agreement? Explain the main ingredients of a franchise agreement.
Franchising is advantageous for both franchisor and franchisee. Explain five advantages of franchising for the franchisee. [5]Answer:
A franchise agreement is the legal document that binds the franchisor and franchisee together. This document explains what the franchisor expects from the franchisee in running the business. The agreement is designed to assure that all of the franchisees within an organization are treated equitably. The expectations must be uniform throughout the system.

The main ingredients of a franchise agreement are:
(i) Contract explanation: The contract explanation is the part of the agreement that outlines the type of relationship a franchisee is entering into with the franchisor.

(ii) Operations manual: The operations manual is the section of the agreement that details the guidelines that the franchisee must legally follow in operating the business as outlined by the franchisor. From time to time amendments may be made and the franchisee must be prepared to adjust operations accordingly. The franchisee needs to be aware that the contents of the document are confidential.

(iii) Proprietary statements: Proprietary statements outline how the franchise name is to be used, as well as the marketing and advertising procedures in place that the franchisee will be required to follow. Also, the franchisor documents how much the franchisee will be required to contribute towards national advertising efforts.

(iv) Ongoing site maintenance: Ongoing site maintenance is another item that is outlined in the agreement. Included in it are the types and time frames regarding various maintenance items and upgrades that must be made to the franchisee’s location.
The advantages of franchising for the franchisee are as follows:
(i) Product acceptance: The franchisee usually enters into a business that has an accepted name, product or service. He/she doesn’t have to spend resources to establish the credibility of the business and create a market for his product. The credibility already exists based on the years the franchise has existed.

(ii) Management expertise: Managerial expertise is provided to the franchisee. Each new franchisee is often required to take a training program on all aspects operating the franchise. This training could include classes in accounting, personnel management, marketing and production.

(iii) Capital requirements: Franchise offers an opportunity to start a new venture with upfront 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.

(v) Operating and structural controls: Two problems that many entrepreneurs have in starting a new venture are maintaining quality control of produce services and establishing effective managerial controls. The franchisor helps the franchisee to combat both the problems.

Question 31.
While there are benefits of going public as a source of finance for a company, it also means additional obligations. Analyse and justify the statement. [5]Answer:
(i) Access to capital:
The primary advantage an entrepreneur stands to gain by going public is access to capital. In addition, the capital does not have to be repaid and does not involve an interest charge.
(ii) Other advantages:

  • Mergers and acquisitions: Public stock of a company can be used for businesses to grow through acquisitions.
  • Higher valuations: Public companies are typically valued more than private companies.
  • Benchmark trading price: The trading price of a public company’s stock serves as a benchmark of the offer price of other securities.
  • Capital formation: Raising capital later is typically easier because of the extra liquidity for the investors.
  • Less dilution: There is less dilution of ownership control compared to an IPO.


  • Increasing accountability to public shareholders.
  • Need to maintain dividend and profit growth trends.
  • Becoming more vulnerable to an unwelcome takeover.
  • Need to observe and adhere strictly to the rules and regulations by governing bodies.
  • Increased costs in complying with higher level of reporting requirements.

Question 32.
Business Plan is valuable to the entrepreneur’s potential investors, venture capitalists, banks, financial institutions, new personnel’s suppliers, customers, advisors, and others who are trying to familiarize themselves with the business venture, its goals, and objectives. State any five reasons for the importance of this document. [5]OR
Enlist five points as to why a private company is more desirable than a public company. [5]Answer:
Importance of business plan:
(i) It helps in determining the viability of the venture in a designated market.

(ii) It helps in providing guidance to the entrepreneur in organizing or her planning activities as such:

  • identifying the resources required,
  • enabling obtaining of licenses if required etc.,
  • working out with Legal requirements as desired by the government.

(iii) It helps in satisfying the concerns, queries, and issues of each group of people interested in the venture.

(iv) It provides room for self-assessment and self-evaluation, requiring entrepreneurs to think through various scenarios and plan ways to avoid obstacles.

(v) It helps to realize the obstacles which cannot be avoided or overcome.

(vi) As the investors/lenders focus on the four Cs of credit: character, cash flow, collateral, and equity contribution, it is the business plan which reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested thus serving as an important tool in funds procurement.
A substantial number of entrepreneurs prefer to form a private company because of the following important privileges:

  • Only two members are required to form a private company.
  • Only two directors are required to constitute the quorum to validate the proceedings of the meetings.
  • Such a company is not required to file a prospectus or a statement in lieu of prospectus with the Registrar of Companies.
  • It can commence its business immediately after incorporation.
  • Holding of a statutory meeting or filing of a statutory report is required by a private company.
  • A non-member cannot inspect the copies of the Profit and Loss Nc filed with the Registrar.
  • Limit on payment of maximum managerial remuneration does not apply to a private company.
  • Restrictions on appointment and reappointment of managing director do not apply.
  • Maintaining an index of members is not required by a private company.
  • Directors of the private company need not have qualification shares.

Question 33.
Best Electronics Ltd. are the manufacturers of ‘Air Conditioners’ and ‘Air Purifiers’. Their fixed costs are ₹ ‘32,00,000 per year. The sales price and variable cost per unit of ‘Air conditioners’ and ‘Air purifiers’ are given below: [5]

Air Conditioners (₹) Air Purifiers (₹)
Sales Price 20,000 5,000
Variable cost 15,000 3,000

During the year the company could sell 1,000 Air conditioners and 1,500 Air purifiers and could not break even. The Air conditioners and Air purifiers were sold in the proportion of 2:3 throughout the year. Calculate break-even in units as well as in rupees.

Air Conditioners Air Purifiers
Sales price per unit 20,000 5,000
Less: Variable cost per unit 15,000 3,000
Contribution margin per unit 5,000 2,000
X Sales mix percentage 2/5 ₹ 2000 3/5 ₹ 1200

Weighted average CM per unit ₹ 3,200 (2,000 + 1,200)
Break-even point in units of sales mix = Total fixed
cost/weighted average CM per unit ₹ 32,00,000, ₹ 3,200 = 1,000 units
Break-even point in units
CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions 1

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 with Solutions

Question 34.
Kiano Mobile Solutions (KMS) has been a leader in the mobile handset industry for years. After technological advancements, many players entered the market and started to take up the sales share. KMS failed to understand the changing trends in the mobile phone and lost its market share majorly whereas Hanhung Mobitech could understand the sensitivity to the environmental factors which is crucial for an entrepreneur. How has the understanding of environment helped Hanhung Mobitech? Explain. [5]Answer:
The benefits of understanding the relevant environment of business 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 capitalise 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 capitalise on opportunities in the market.

(iii) Tapping useful resources: If the 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, at the right time.

(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 for the purpose of improvement in the performance of the firm

(v) Sensitisation 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. This would build the image or reputation of the firm in the eyes of the general public.

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