Read the following statements carefully : Statement - I : Control should focus on key result areas which are critical to the success of an organization. Statement - II : Only significant deviations which go beyond the permissible limit should be brought to the notice of management. With reference to the given statements, choose the correct alternative from the following :

Q: Read the following statements carefully : Statement - I : Control should focus on key result areas which are critical to the success of an organization. Statement - II : Only significant deviations which go beyond the permissible limit should be brought to the notice of management. With reference to the given statements, choose the correct alternative from the following :

The correct answer is **(A) Both the statements are true.** - **Statement I** is true: Controlling should apply the critical point control principle, focusing managerial attention on Key Result Areas (KRAs) which are critical to organisational success rather than trying to monitor every activity. - **Statement II** is also true: This is the principle of management by exception, whereby only significant deviations beyond the permissible/tolerance limit are reported to management, so that managerial time is used efficiently.

Controlling

Principles of Controlling — Critical Point Control & Management by Exception

Options

(A)Both the statements are true.

(B)Both the statements are false.

(C)Statement I is true and Statement II is false.

(D)Statement I is false and Statement II is true.

Official Answer

The correct answer is (A) Both the statements are true.

Statement I is true: Controlling should apply the critical point control principle, focusing managerial attention on Key Result Areas (KRAs) which are critical to organisational success rather than trying to monitor every activity.
Statement II is also true: This is the principle of management by exception, whereby only significant deviations beyond the permissible/tolerance limit are reported to management, so that managerial time is used efficiently.

critical point controlmanagement by exceptionkey result areascontrolling principlessignificant deviationspermissible limit

Marking Scheme

11 mark for correctly identifying option (A) 'Both the statements are true' with recognition of critical point control (Statement I) and management by exception (Statement II).

Hint

Both statements describe well-known, separate principles of controlling (critical point control and management by exception) — check each independently before combining.

Quick Oral Answer

Both statements are true — critical point control means focusing on key result areas, and management by exception means reporting only significant deviations.

Analysis & Explanation

This question tests two closely related principles that make the controlling process practical and efficient.

Statement I — Critical Point Control

Since it is neither possible nor necessary to control every single activity, managers should concentrate on Key Result Areas (KRAs) — the aspects most critical to the organisation's overall success. This statement is textbook-correct.

Statement II — Management by Exception

Under this principle, only deviations that exceed a defined, acceptable range are escalated to management for corrective action. Minor, insignificant deviations are ignored to avoid wasting managerial time. This is also textbook-correct.

Why the other options are wrong

(B) is wrong because both statements individually match established controlling principles.
(C) and (D) are wrong because they incorrectly mark one of the two true statements as false; both are, in fact, true and mutually reinforcing (critical point control identifies WHERE to focus, management by exception decides WHEN to escalate).

Exam tip: These two principles are often tested together — critical point control is about which areas to monitor, management by exception is about which deviations to report.

Common Mistakes

1Treating critical point control and management by exception as the same principle — they are related but distinct: one is about selecting focus areas, the other about escalation thresholds.
2Assuming that because control should be selective, one of the two statements must be false.

Interesting Facts

The management-by-exception principle is widely used in modern automated dashboards and ERP systems, which flag only out-of-range metrics (e.g., variance beyond ±5%) to managers instead of reporting every data point.

Key Result Areas (KRAs) are typically derived directly from an organisation's critical success factors, such as production cost, quality, market share, and profitability.

Spotted a mistake or something unclear?

Tell us — we fix reported answers fast.

Frequently Asked Questions

What is critical point control?

Critical point control means a manager should focus control efforts on Key Result Areas (KRAs) that are critical to the success of the organisation, rather than trying to control every activity.

What is management by exception?

Management by exception means only significant deviations which exceed the permissible limit are brought to the attention of management, saving managerial time for more important matters.