Practice Chemical Engineering Plant Economics Multiple Choice Questions with Answers Quiz-4

Q.1.

Annual depreciation cost are not constant when, the __________ method of depreciation calculation is used.

Straight line
Sinking fund
Present worth
Declining balance

Q.2.

The 'total capital investment' for a chemical process plant comprises of the fixed capital investment and the

Overhead cost
Working capital
Indirect production cost
Direct production cost

Q.3.

If an amount R is paid at the end of every year for 'n' years, then the net present value of the annuity at an interest rate of i is

R[((1 + i)ⁿ - 1)/i]
[((1 + i)ⁿ - 1)/i(1 + i)ⁿ]
R(1 + i)ⁿ
R/(1 + i)ⁿ

Q.4.

Construction expenses are roughly __________ percent of the total direct cost of the plant.

2
10
30
50

Q.5.

In financial accounting of a chemical plant, which of the following relationship is invalid?

Assets = equities
Assets = liabilities + net worth
Total income = costs + profits
Assets = capital

Q.6.

A shareholder has __________ say in the affairs of company management compared to a debenture holder.

More
Less
Same
No

Q.7.

Chemical engineering plant cost index is used for finding the present cost of a particular chemical plant, if the cost of similar plant at some time in the past is known.
The present cost of the plant = original cost x (index value/(index value at original cost was obtained)
The most major component of this cost index is

Fabricated equipment and machinery
Process instruments and control
Pumps and compressor
Electrical equipments and material

Q.8.

__________ of depreciation calculation accounts for the interest on investement.

Straight line method
Declining balance
Both A and B
Neither A nor B

Q.9.

The payback method for the measurement of return on investment

Gives a correct picture of profitability
Underemphasises liquidity
Does not measure the discounted rate of return
Takes into account the cash inflows after the recovery of investments

Q.10.

Personnel working in the market research group is reponsible for the job of

Equipment selection
Product evaluation
Equipment design
Cost estimation

Q.11.

Payback period

And economic life of a project are the same
Is the length of time over which the earnings on a project equals the investment
Is affected by the variation in earnings after the recovery of the investment
All of the above

Q.12.

A balance sheet for an industrial concern shows

The financial condition at any given time
Only current assets
Only fixed assets
Only current and fixed assets

Q.13.

Pick out the wrong statement.

Gross revenue is that total amount of capital received as a result of the sale of goods or service
Net revenue is the total profit remaining after deducting all costs excluding taxes
The ratio of immediately available cash to the total current liabilities is known as the cash ratio
Consolidated income statement based on a given time period indicates surplus capital and shows the relationship among total income, costs & profit over the time interval

Q.14.

Pick out the wrong statement.

Net worth means paid up share capital and reserve & surplus (i.e. shareholders equity)
Return on equity = profit after tax/net worth
Working capital turn over ratio = sales/net working capital
Total cost of production is more than net sales realisation (NSR) at break even point

Q.15.

Effluent treatment cost in a chemical plant is categorised as the __________ cost.

Fixed
Overhead
Utilities
Capital

Q.16.

For a typical project, the cumulative cash flow is zero at the

end of the project life.
break even point.
start up.
end of the design stage.

Q.17.

The amount of simple interest during 'n' interest period is (where, i = interest rate based on the length of one interest period, p = principal)

p.i.n.
p(1 + i.n)
p(1 + i)n
p(1 - i.n)

Q.18.

Generally, income taxes are based on the

total income
gross earning
total product cost
fixed cost

Q.19.

With increase in the discounted cash flow rate of return, the ratio of the total present value to the initial investment of a given project

decreases
increases
increases linearly
remains constant

Q.20.

Which of the following does not come under the sales expenses for a product of a chemical plant ?

Advertising
Warehousing
Legal fees
Customer service.

Q.21.

Which of the following methods of depreciation calculations results in book values greater than those obtained with straight line method ?

Multiple straight line method
Sinking fund method
Declining balance method
Sum of the years digit method

Q.22.

An investment of Rs.lakhs is to be made for construction of a plant, which will take two years to start production. The annual profit from the operation of the plant is Rs.lakhs. What will be the pay back time ?

5 years
7 years
12 years
10 years

Q.23.

Pick out the correct statement.

Difference between income and expense is termed as gross revenue.
Unamortised cost is the difference between the original cost of a property and all the depreciation charges made to date.
Sum-of-the-years-digits methods of depreciation calculation accounts for the interest on the investment.
Scrap value is the net amount of money obtainable from the sale of used property over and above any charges involved in its removal & sale.

Q.24.

A balance sheet for an industrial concern shows

the financial condition at any given time.
only current assets.
only fixed assets.
only current and fixed assets.

Q.25.

__________ of depreciation calculation does not take into account the interest on investments.

Present worth method
Sinking fund method
Sum of the years-digits method
all (a), (b) and (c)

Q.26.

If 'S' is the amount available after 'n' interest periods for an initial principal 'P' with the discrete compound interest rate 'i', the present worth is given by

(1 + i)ⁿ/S
S/(1 + i)ⁿ
S/(1 + in)
S/(1 + n)ⁱ

Q.27.

Total product cost of a chemical plant does not include the __________ cost.

market survey
operating labour, supervision and supplies
overhead and utilities
depreciation, property tax and insur-rance

Q.28.

The value of a property decreases __________ with time in straight line method of determining depreciation.

linearly
non-linearily
exponentially
logarithmically

Q.29.

'Lang factor' is defined as the ratio of the capital investment to the delivered cost of major equipments. The value of 'Lang factor' for fixed capital investment, for a solid-fluid processing chemical plant ranges from

1.2 to 1.4
2.5 to 2.7
4.2 to 4.4
6.2 to 6.4

Q.30.

Optimum number of effects in a multiple effect evaporator is decided by the

cost benefit analysis.
floor area availability.
terminal parameters.
evaporation capacity required.

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