1000+ Chemical Engineering Plant Economics MCQ for SBI PO [Solved]

1. Break-even point is the point of intersection of
A. Fixed cost and total cost
B. Total cost and sales revenue
C. Fixed cost and sales revenue
D. None of these
Answer : B

2. Which of the following elements is not included in the scope of market analysis?
A. Competition from other manufactures
B. Product distribution
C. Opportunities
D. Economics
Answer : D

3. Pick out the wrong statement.
A. Net worth means paid up share capital and reserve & surplus (i.e. shareholders equity)
B. Return on equity = profit after tax/net worth
C. Working capital turnover ratio = sales/net working capital
D. Total cost of production is more than net sales realisation (NSR) at breakeven point
Answer : D

4. Factory manufacturing cost is the sum of the direct production cost
A. Fixed charges and plant overhead cost
B. And plant overhead cost
C. Plant overhead cost and administrative expenses
D. None of these
Answer : A

5. Which of the following is a component of working capital investment?
A. Utilities plants
B. Maintenance and repair inventory
C. Process equipments
D. Depreciation
Answer : B

6. Effluent treatment cost in a chemical plant is categorised as the __________ cost.
A. Fixed
B. Overhead
C. Utilities
D. Capital
Answer : C

7. Which of the following is the costliest material of construction used in pressure vessel construction?
A. Low alloy steel
B. Lead
C. Titanium
D. High alloy steel
Answer : C

8. The inventory of raw materials included in the working capital is usually about __________ months supply of raw materials valued at delivery prices.
A. One
B. Three
C. Six
D. Twelve
Answer : A

9. Expenditure on research and development (R & D) is categorised as the __________, while making an estimate of the total product cost for a chemical plant.
A. Overhead cost
B. Fixed expenses
C. General expenses
D. Direct production cost
Answer : C

10. The value of a property decreases __________ with time in straight line method of determining depreciation.
A. Linearly
B. Non-linearly
C. Exponentially
D. Logarithmically
Answer : A

11. Total product cost of a chemical plant does not include the __________ cost.
A. Market survey
B. Operating labour, supervision and supplies
C. Overhead and utilities
D. Depreciation, property tax and insurance
Answer : A

12. 'P' is the investment made on an equipment, 'S' is its salvage value and 'n is the life of the equipment in years. The depreciation for Rath year by the sum-of years digit method will be
A. (P - S)/n
B. 1 - (P/S)^1/m
C. (m/n) (P - S)
D. [2 (n - m + 1)/n(n + 1)]. (P - S)
Answer : D

13. Pick out the correct statement.
A. Difference between income and expense is termed as gross revenue
B. Unamortised cost is the difference between the original cost of a property and all the depreciation charges made to date
C. Sum-of-the-years-digits methods of depreciation calculation accounts for the interest on the investment
D. 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
Answer : B

14. Purchased cost of equipments for a chemical process plant ranges from __________ percent of the fixed capital investment.
A. 10 to 20
B. 20 to 40
C. 45 to 60
D. 65 to 75
Answer : B

15. The economic life of a large chemical process plant as compared to a small chemical plant is
A. Only slightly more
B. Much more
C. Slightly less
D. Almost equal
Answer : B

16. Which of the following is not a component of depreciation cost?
A. Repairs and maintenance cost
B. Loss due to obsolescence of the equipment
C. Loss due to decrease in the demand of product
D. Loss due to accident/breakdown in the machinery
Answer : A

17. Depreciation is __________ in profit with time.
A. Decrease
B. Increase
C. No change
D. None of these
Answer : A

18. Gantt chart (or Bar chart) is helpful in
A. Efficient utilisation of manpower and machines
B. Preparing production schedule
C. Efficient despatching of products
D. Inventory control
Answer : B

19. Which of the following is the cheapest material of construction for the storage of sodium hydroxide upto a concentration of 75%?
A. Stainless steel
B. Plain carbon steel
C. Nickel
D. Copper
Answer : B

20. Annual depreciation costs are constant, when the __________ method of depreciation calculation is used.
A. Declining balance
B. Straight line
C. Sum of the years digit
D. None of these
Answer: B

21. An investment of Rs. 100 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. 20 lakhs. What will be the payback time?
A. 5 years
B. 7 years
C. 12 years
D. 10 years
Answer : B

22. For a typical project, the cumulative cash flow is zero at the
A. End of the project life
B. Breakeven point
C. Start up
D. End of the design stage
Answer : B

23. Manufacturing cost in a chemical company does not include the
A. Fixed charges
B. Plant overheads
C. Direct products cost
D. Administrative expenses
Answer : D

24. Fixed capital investment of a chemical plant is the total amount of money needed to supply the necessary plant and manufacturing facilities plus the working capital for operation of the facilities. Which of the following components of fixed capital investment requires minimum percentage of it?
A. Electrical installation cost
B. Equipment installation cost
C. Cost for piping
D. Equipment insulation cost
Answer : D

25. Cost incurred towards __________ in a chemical plant is a component of the utilities cost.
A. Water supply
B. Running a control laboratory
C. Property protection
D. Medical services
Answer : A

26. Operating profit of a chemical plant is equal to
A. Profit before interest and tax i.e., net profit + interest + tax
B. Profit after tax plus depreciation
C. Net profit + tax
D. Profit after tax
Answer : A

27. Pick out the wrong statement.
A. Debt-equity ratio of a chemical company describes the lenders contribution for each rupee of owner's contribution i.e., debt-equity ratio = total debt/net worth
B. Return on investment (ROI) is the ratio of profit before interest & tax and capital employed (i.e. net worth + total debt)
C. Working capital = current assets + current liability
D. Turn over = opening stock + production closing stock
Answer : C

28. The __________ of a chemical company can be obtained directly from the balance sheet as the difference between current assets and current liabilities.
A. Cash ratio
B. Net working capital
C. Current ratio
D. Liquids assets
Answer : B

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
A. 1.2 to 1.4
B. 2.5 to 2.7
C. 4.2 to 4.4
D. 6.2 to 6.4
Answer : C

30. Which of the following is not a component of working capital?
A. Raw materials is stock
B. Finished products in stock
C. Transportation facilities
D. Semi-finished products in the process
Answer : C

31. Following the six-tenth factor rule, if a loglog plot of capacity of the equipment vs. cost of the equipment is made, then a straight line is obtained, whose slope is equal to
A. 0.1
B. 0.6
C. 0.2
D. 0.8
Answer : B

32. 'Six-tenth factor' rule is used for estimating the
A. Equipment installation cost
B. Equipment cost by scaling
C. Cost of piping
D. Utilities cost
Answer : B

33. In financial accounting of a chemical plant, which of the following relationship is invalid?
A. Assets = equities
B. Assets = liabilities + net worth
C. Total income = costs + profits
D. Assets = capital
Answer : D

34. Utilities cost in the operation of chemical process plant comes under the
A. Plant overhead cost
B. Fixed charges
C. Direct production cost
D. General expenses
Answer : C

35. A shareholder has __________ say in the affairs of company management compared to a debenture holder.
A. More
B. Less
C. Same
D. No
Answer : A

36. The 'total capital investment' for a chemical process plant comprises of the fixed capital investment and the
A. Overhead cost
B. Working capital
C. Indirect production cost
D. Direct production cost
Answer : B

37. Which of the following ceramic packing materials is the costliest of all?
A. Berl saddles
B. Raschig rings
C. Pall rings
D. Intalox saddles
Answer : A

38. In declining balance method of depreciation calculation, the
A. Value of the asset decreases linearly with time
B. Annual cost of depreciation is same every year
C. Annual depreciation is the fixed percentage of the property value at the beginning of the particular year
D. None of these
Answer : C

39. An investment of Rs. 1000 is carrying an interest of 10% compounded quarterly. The value of the investment at the end of five years will be
A. 1000 (1 + 0.1/4)²⁰
B. 1000 (1 + 0.1)²⁰
C. 1000 (1 + 0.1/4)⁵
D. 1000 (1 + 0.1/2)⁵
Answer : A

40. Cost of piping in a fluid processing unit (e.g., distillation) of a chemical process plant is about __________ percent of the fixed capital investment.
A. 4
B. 13
C. 22
D. 34
Answer : B

41. The depreciation during the year 'n', in diminishing balance method of depreciation calculation, is calculated by multiplying a fixed percentage 'N' to the
A. Initial cost
B. Book value at the end of (n - 1)th year
C. Depreciation during the (n - 1)th year
D. Difference between initial cost and salvage value
Answer : B

42. Profit is equal to revenue minus
A. Book value
B. Total cost
C. Operating cost
D. None of these
Answer : B

43. An annuity is a series of equal payments occuring at equal time intervals, and this amount includes the sum of all payments plus interest, if allowed to accumulate at a definite rate of interest from the time of initial payment to the end of annuity term. Ordinary annuity is used in the calculation of the
A. Manufacturing cost
B. Depreciation by sinking fund method
C. Discrete compound interest
D. Cash ratio
Answer : B

44. The ratio of working capital to total capital investment for most chemical plants (except for nonseasonal based products) is in the range of __________ percent.
A. 0.1 to 1
B. 1 to 2
C. 10 to 20
D. 50 to 60
Answer : C

45. Personnel working in the market research group is responsible for the job of
A. Equipment selection
B. Product evaluation
C. Equipment design
D. Cost estimation
Answer : B

46. Nominal and effective interest rates are equal, when the interest is compounded
A. Quarterly
B. Semi-annually
C. Annually
D. In no case, they are equal
Answer : C

47. Maximum production start up cost for making a chemical plant operational is about __________ percent of the fixed capital cost.
A. 1
B. 5
C. 10
D. 30
Answer : C

48. Generally, income taxes are based on the
A. Total income
B. Gross earning
C. Total product cost
D. Fixed cost
Answer : B

49. 'Utilities' in a chemical process plant includes compressed air, steam, water, electrical power, oxygen, acetylene, fuel gases etc. Utility costs for ordinary chemical process plants ranges roughly from __________ percent of the total product cost.
A. 1 to 5
B. 10 to 20
C. 25 to 35
D. 35 to 45
Answer : B

50. Fixed charges for a chemical plant does not include the
A. Interest on borrowed money
B. Rent of land and buildings
C. Property tax, insurance and depreciation
D. Repair and maintenance charges
Answer : D