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IGNOU Solved Question Papers: ECO - 03 (December' 2013) | IGNOU B.Com Solved Question Paper


IGNOU B.Com Solved Question Paper

Term-End Examination (December, 2013)



Time: 2 hours (Maximum Marks: 50)

(Weightage: 70%)

Note: Attempt both section-A and section-B. .


Attempt any three questions:

1. Define 'Management'. Briefly explain the functions of management.      5+7

Ans: Management: Management is the coordination of all resources through the process of planning, organising, directing, staffing and controlling in order to attain stated objectives effectively and efficiently.  Effectively means doing the right task, completing activities and achieving goals and efficiently means to attain objectives with least amount of resources at a minimum cost. This process starts at the top and continues in more or less degree at every level of the organisation.

According to Harold Koontz, “Management is an art of getting things done through others and with formally organised groups."

According to F.W. Taylor, “Management is an art of knowing what do you want to do and then seeing that is is done in the best and cheapest way.”

According to Henry Fayol, “To manage is to forecast, to plan, to organize, to command to co-ordinate and control.

Functions/Elements of Management

According to Henry Fayol, in every organisation manager perform certain functions to achieve results. These functions are broadly classified under five categories:-

a)      Planning: Planning is a process of making decision about future. It provides direction to enterprise activities. Its work is to decide in advance what is to be done, when and where it is to be done, how it is to be done and by whom. The main functions of planning are Set up goals, Forecasting, Search for alternatives source of action and Budgeting.

b)      Organising: It is concerned with the arrangement of an organisation’s resources – people, material, technology and finances in order to achieve enterprise objective. The main functions of organising are Job design, Job specification and Authority and responsibility.

c)      Staffing: Staffing is the function of employing suitable personas for the enterprise. It may be defined as an activity where people are recruited, selected, trained, developed, motivated and compensated for manning various positions.

d)      Directing: According to Dale, direction is telling people what to do and seeing that they do it to the best of their ability. Directing is a function of guiding and supervising the activities of sub ordinates. The three main elements of directing are:-

1. Leadership: It is a process of influencing the action of a person or a group to attain desired objectives. The success of an organisation depends upon the quality of leadership shown by its managers.

2. Motivation: It is the process of stimulating people to take desired courses of action. It is to inspire, encourage and impel people to take required action.

3. Communication: It is a way of reaching other with ideas, facts, and thoughts. Effective communication is important in organisation because managers Can achieve very little without it.

e)      Controlling: It is the management function concerned with monitoring employee’s activities, keeping the organisation on track towards its goals, and making corrections as required. It include four things:

Ø  setting standard of performance;

Ø  measuring actual performance;

Ø  comparing actual performance against the standard ;

Ø  taking corrective actions to ensure goal accomplishment.

2. Explain the meaning and importance of Departmentation. What are the factors taken into account while selecting a suitable basis of Departmentation? 3+4+5

Ans: Departmentation: The process of dividing activities into units and subunits is referred to as Departmentation. The term Departmentation is used in a generic sense n is not only confined to the creation of such units as are called departments, but it includes divisions, sections and jobs also.

Dividing up work calls or identification of total activities and classification of such activities into units and subunits. There are three bases for primary grouping of activities at the second level of the organisation just below the top level. Units at the second level are commonly called departments when business functions are adopted as the pattern of grouping activities. Such units go by the name of divisions when either product manufactured or territories are adopted as the means of classifying activities.

Advantages of Departmentation

1)      There is specialization in Departmentation, as the work of the concern as a whole is divided into different specialized functions like production, purchasing, marketing, finance, personnel relations, etc. and each specialized function is entrusted to a functional expert or specialist.

2)      In Departmentation, the line executive receives instructions not only from his line boss but also from one or more specialists.

3)      Under this system, the principle of unity of command is not observed, as a single worker has to get instructions from more than one specialist.

Choice of bases for departmentation Or DETERMINANTS OF DEPARTMENTATION

The selection of bases for Departmentation involves a consideration of the relative advantages of each base for the organisation. Ideally speaking, a suitable basis of Departmentation is one which facilitates the performance of organisational functions efficiently and effectively so that its objective is achieved.

1)      Specialization: While assigning activities into departments, care must be taken to ensure that the benefits of specialization are achieved.

2)      Control: One of the primary aims of Departmentation is to facilitate control. Departments should be so created as to fix clear responsibilities so as to enable effective control.

3)      Coordination: Coordination involves that all the related activities are performed in a way that their performance is synchronized so that each activity contributes to others.

4)      Economy: A balance should be maintained between the cost of creating a department and its contribution. The existence of a department is desirable only when it contributes more than its cost.

5)      Focus on Result: Those activities which contribute to the achievement to these results should be given proper attention.

6)      Human Considerations: Departments should be created on the basis of availability of personnel, their aspirations and value systems, informal work groups and attitudes of people towards various forms of organisation structure.

7)      Emphasis on Local Conditions: while assigning activities proper emphasis should be given to local conditions at the places concerned, viz. the personality of the individuals who may be given the responsibilities, the nature of informal relationship among the people, the attitude of the people, etc.

8)      Economy: Another important factor to be considered while creating separate departments is the expense involved and economy in its operations.

9)      Key Activities: there are certain activities which are very crucial. Such activities should be placed in separate divisions.

3. (a) Critically examine democratic style of leadership. 6+6

Ans: Democratic or Participative Style leader: The democratic or participative style of leadership implies compromise between the two extremes of autocratic and laissez-fair style of leadership. Under this style, the supervisor acts according to the mutual consent and the decisions reached after consulting the subordinates. Subordinates are encouraged to make suggestions and take initiative. It provides necessary motivation to the workers by ensuring their participation and acceptance of work methods. Mutual trust and confidence is also created resulting in job satisfaction and improved morale of workers. It reduces the number of complaints, employee's grievances, industrial unrest and strikes. But this style of leadership may sometimes cause delay in decisions and lead to indiscipline in workers.


a)      Positive work environment

b)      Successful initiatives

c)      Creative thinking

d)      Reduction of friction and office politics

e)      Reduced employee turnover


a)      Takes long time to take decisions

b)      Danger of pseudo participation

c)      Like the other styles, the democratic style is not always appropriate. It is most successful

d)      when used with highly skilled or experienced employees or when implementing operational changes or resolving individual or group problems.

(b) Describe the important functions of leadership.

Ans: Significance of Leadership: The importance of leadership are as follows:

1.      It improves motivation and morale: Through dynamic leadership managers can improve motivation and morale of their subordinates. A good leader influences the behaviour of an individual in such a manner that he voluntarily works towards the achievement of enterprise goals.

2.      It acts as a motive power to group efforts: Leadership serves as a motive power to group efforts. It leads the group to a higher level of performance through its persistent efforts and impact. On human relations.

3.      It acts as an aid of authority: The use of authority alone cannot always bring the desired results. Leadership acts as an aid to authority by influencing, inspiring, and initiating action.

4.      It is needed at all levels of management: Leadership plays a pivotal role at all levels of management because in the absence of effective leadership no management can achieve the desired results.

5.      It rectifies the imperfectness of the formal organizational relationships: No organizational structure can provide all types of relationships and people with common interest may work beyond the confines of formal relationships. Such informal relationships are more effective in controlling and regulating the behaviour of the subordinates. Effective leadership uses these informal relationships to accomplish the enterprise goals.

6.      It provides the basis of co-operations: Effective leadership increases the understanding between the subordinates and the management and promotes co-operation among them.

4. What do you mean by supervision? Describe the qualities of a good supervisor.   3+9

Ans: The word supervision is the combination of two words i.e., super+vision where super means over and above and vision means seeing. Thus, supervision means overseeing the subordinates at work. supervision refers to the direct and immediate guidance and control of subordinates in performance of their task.

Qualities of a Good Supervisor

a)      Good Personality and self confidence: A good personality is a combination of physical, mental and social qualities. Good personality helps a supervisor to influence his subordinates. Also  he must have self confidence which is necessary for facing challenging situations and for solving problems easily and effectively.

b)      Human Skills: A good supervisor must have essential social and human skills. That is, he must understand his subordinates. This quality is necessary for dealing with different types of employees working in an organisation.

c)      Judgment skills: A good supervisor should be able to examine problems in right perspective. His judgment and decision making abilities should be superior to others. He should be able to form opinions and judge based on facts and not be prejudiced

d)      Communication and technical skills: A good supervisor should be able to communicate the goals and procedures of the organisation clearly, precisely and effectively to the subordinates. He must also be familiar with the technology used within the organisation.

e)      Listening skills: Employees just have a supervisor who does not listen. Hence a good supervisor in one who can listen to his subordinates’ problems. He should be able to create a culture whereby subordinates can be frank with him and give him information and also give him feedback about himself, which can help him to improve himself.

f)       Inspiring skills: A good supervisor should be able to inspire his subordinates. He should not just command and control but be able to inspire his subordinates and get them involved to work together as a team.

g)      Administrative Skills and ability to develop organisation: A good supervisor must have an administrative ability. This means, he must be able to get the work done through his subordinates. He must know how to plan, organize and control the work of his subordinates. He must also be able to develop an effective organisation that meets current needs.

h)      Discipline: A good supervisor must be a disciplined person. This means he must have respect for the rule and regulations of the organisation. This is because his subordinates will follow his example.

5. (a) Explain the elements of communication process.  6+6

Ans: Process of Communication

The process of communication is the inter relationship between several independent components. It consists of a chain of related actions and reaction which together result in exchange of information. In order to understand the process of communication, it is necessary to describe each of these components. A model of communication process is as follows:

1.      Sender: The sender is the first component of the process of c communication. The sender may be a speaker, a writer or any other person. He is the one who has a message and wants it to share it for some purpose.

2.      Ideation: Ideation is the preliminary step in communication where sender creates an idea to communicate. This idea is the content and basis of the message to be communicated. Several ideas may generate in the sender’s mind. The sender must identify, analyze and arrange the ideas sequentially before transmitting them to the receiver.

3.      Message: Message is the heart of communication. It is what the sender wants to convey to the receiver. It may be verbal i.e. written or spoken or non verbal i.e. body language, space language, etc.

4.      Encoding: To encode is to put an idea into words. In this step the communicator organizes his ideas into a series of symbols or words which will be communicated to the intended receiver. Thus the ideas are converted into words or symbols. The words and the symbols should be selected carefully, it should be understandable and most of all it should be suitable for transmission and reception.

5.      Transmission: Next in the process of communication is transmission of the message as encoded messages are transmitted through various media and channels of communication connects the sender and the receiver. The channel and media should be selected keeping in mind the requirement of the receiver, the communication to be effective and efficient the channel should be appropriate.

6.      Receiver: Receiver is the person or group for whom the message is meant. He may be a listener, a reader or a viewer. Any neglect on the part of the receiver may make the communication ineffective. Receiver is thus the ultimate destination of the message. It the message does not reach the receiver the communication is said to be incomplete.

7.      Decoding: Decoding means translation of symbols encoded by the sender into ideas for understanding. Understanding the message by receiver is the key to the decoding process. The message should be accurately reproduced in the receiver’s mind. If the receiver is unable to understand the message correctly the communication is ineffective.

8.      Behaviour of the receiver: It refers to the response by the receiver of the communication received from the sender. He may like to ignore the message or to store the information received or to perform the task assigned by the sender. Thus communication is complete as soon as the receiver responses.

9.      Feedback: Feedback indicates the result of communication. It is the key element in the communication and is the only way of judging the effectiveness of communication. It enables the sender to know whether his message has been properly interpreted or not. Systematic use of feedback helps to improve future message. Feedback, like the message could be oral, written or non verbal. It has to be collected from the receiver.

(b) How can communication be made effective? State with examples.

Ans: Communication becomes effective when the receiver understands the meaning of the message as the sender intends. To make communication effective, the following rules should be involved:

1. Specific Purpose: The sender must be clear about the specific purpose that he wants to communicate to the receiver.

2. Study the Listener: The sender must study the interest and attitude of the receiver to make communication effective more.

3.  Organization of Idea or Thought: The communicator must make up a plan about how he is going to communicate. He must organize his thoughts and ideas in advance.

4. Proper Transmission of Message: The message must be transmitted in such a way that it is accepted by the listener or reader with interest.

5. Personal Touch: The personal element is the keynote of communication. Sender's sincerity & sympathy influence the listener a lot. 

6. Mutual Understanding: A mutual understanding should be established between the sender and receiver of the message.

6. Do you feel that external sources of recruitment are better than the internal sources of recruitment? If so why?  12

Ans: The sources of recruitment may be classified into internal sources and External Sources.

Internal Sources: Internal sources are considered to be more important and reliable sources.  It includes the employees of the organization, the employed who had left the organization but desire to join the organization again, or those to whom the company may like to rehire as they had left voluntarily or those on production lay off.

External Sources: These are sources, which lie outside the organization.  These sources includes new entry in the labour force especially young energetic inexperienced potential employees like college students. This method of recruitment is considered to be more suitable because of the following reasons:

a)      Recruitment of internals leads to inbreeding and discourages new blood with new ideas from entering into the organization.

b)      It is possible that internal sources ultimately dry up and hence it may be difficult to find suitable persons from within the organization.

c)      In case of certain jobs such as advertising, style, designing, basic research etc recruitment from within is not desirable.

d)      In many organizations promotion is based on seniority and there is a danger that right type of man may not be chosen.

e)      Likes and dislikes of management may affect the process of selection of persons.

f)       External sources provide huge scope for selecting required type of personnel for the organization, having necessary skill, abilities, education, training upto  required standard.

g)      Since few people are to be selected from very large market, it becomes possible to select best persons irrespective of caste, sex, religion etc.

h)      In the long run to external sources are more economical because potential employees may not need extra training for their jobs.


7. Write explanatory notes on any two of the following. 7+7

(a) Break - Even Analysis.

Ans: Break even analysis: The study of cost-volume-profit analysis is often referred to as “Break even analysis “and the two terms are used interchangeably by many. This is why break even analysis is a known form of cost-volume-profit analysis. The term break even analysis is used in two sense – narrow sense and broad sense. In its broad sense, break even analysis refers to the study of relationship between cost, volume and profit. In its narrow sense, it refers to a technique of determining that level of operations where total revenue equal total expenses i.e., breakeven point.

The main Features (Characteristics) of Break even analysis are as follows:

1. Cost Classification: This technique makes a sharp distinction between variable costs and fixed costs. It is the variable cost on the basis of which production and sales policies are designed by a firm.

2. Managerial Decisions: It is a technique of analysis and presentation of costs which help management in taking many managerial decisions such as make or buy decision, selling price decisions etc.

3. Inventory Valuation: Under break even analysis technique, inventory for profit measurement is valued at marginal cost only.

4. Price Determination: Prices are determined on the basis of marginal cost by adding contribution which is the excess of selling price over variable costs of sales.

5. Contribution: Break even analysis makes use of Contribution for taking various decisions. Contribution is the difference between sales and marginal cost. It forms the basis for judging the profitability of different products or departments.

(b) Positive and Negative Motivation

(c) Unity of command

(d) Means of effective delegation

Ans: Principles of Effective Delegation of Authority or How barriers can be removed or Elements of delegation:

a)      Knowledge of Objectives: Before delegating authority, the subordinates should be made to understand their duties and responsibilities. In addition, knowledge of objectives and policies of the enterprise should be provided to them.

b)      Parity of Authority and Responsibility: This principle of delegation suggests that when authority is delegated, it should be commensurate with the responsibility of the subordinate.

c)      Unity of Command: This principle of delegation suggests that everyone should have only one boss. A subordinate should get orders and instructions from one superior and should be made accountable to one superior only.

d)      The Scalar Principle: The scalar principle of delegation maintains that there should be clear and direct lines of authority in the Organisation, running from the top to the bottom. The subordinate should know who delegates authority to him and to whom he should contact for matters beyond his authority.

e)      Clarity of Delegation: The principle of clarity of delegation suggests that while delegating authority to subordinates, they should be made to understand the limits of authority so that they know the area of their operation and the extent of freedom of action available to them. Such clarity guides subordinates while performing their jobs.


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