1000+ Chemical Engineering Plant Economics Multiple Choice Question Answer [Solved]

1. 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

2. '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

3. In which of the electric power generation system, the operating cost is minimum?
A. Thermal
B. Nuclear
C. Hydroelectric
D. Fast breeder reactor
Answer : C

4. Optimum economic pipe diameter for fluid is determined by the
A. Viscosity of the fluid
B. Density of the fluid
C. Total cost considerations (pumping cost plus fixed cost of the pipe)
D. None of these
Answer : C

5. 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

6. __________ of depreciation calculation accounts for the interest on investment.
A. Straight line method
B. Declining balance
C. Both (A) and (B)
D. Neither (A) nor (B)
Answer : D

7. 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

8. 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

9. The ratio of gross annual sales to the fixed capital investment is termed as the __________ ratio.
A. Cash reserve
B. Capital
C. Turnover
D. Investment
Answer : C

10. 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

11. In a chemical process plant, the total product cost comprises of manufacturing cost and the
A. General expenses
B. Overhead cost
C. R & D cost
D. None of these
Answer : A

12. 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

13. Which of the following is not a component of the fixed capital for a chemical plant facility?
A. Raw materials inventory
B. Utilities plants
C. Process equipment
D. Emergency facilities
Answer : A

14. A reactor having a salvage value of Rs. 10000 is estimated to have a service life of 10 years. The annual interest rate is 10%. The original cost of the reactor was Rs. 80000. The book value of the reactor after 5 years using sinking fund depreciation method will be Rs.
A. 40,096
B. 43,196
C. 53,196
D. 60,196
Answer : D

15. If the interest rate of 10% per period is compounded half yearly, the actual annual return on the principal will be __________ percent.
A. 10
B. 20
C. > 20
D. < 20
Answer : C

16. 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

17. 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

18. Relative cost of chemical process plants in India is about __________ percent more than the similar plants in U.S.A.
A. 15
B. 35
C. 55
D. 75
Answer : B

19. __________ taxes are based on gross earnings.
A. Property
B. Excise
C. Income
D. Capital gain
Answer : C

20. 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
A. (1 + i)ⁿ/S
B. S/(1 + i)ⁿ
C. S/(1 + in)
D. S/(1 + n)ⁱ
Answer : B

21. Most chemical plants use an initial working capital amounting to 10-20% of the total capital investment. But this percentage may increase to __________ percent in case of seasonal products manufacturing plant.
A. 30
B. 50
C. 75
D. 95
Answer : B

22. Which of the following is the costliest source of getting hydrogen on commercial scale for the manufacture of nitrogenous fertiliser?
A. Coal gasification
B. Steam reforming of naphtha
C. Electrolysis of water
D. Coke oven gas
Answer : C

23. According to six-tenths-factor rule, if the cost of a given unit at one capacity is known, then the cost of similar unit with '' times the capacity of the first unit is approximately equal to __________ times the cost of the initial unit.
A. n
B. n0.6
C. n0.4
D. ?n
Answer : B

24. 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

25. 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

26. Annual depreciation cost are not constant when, the __________ method of depreciation calculation is used.
A. Straight line
B. Sinking fund
C. Present worth
D. Declining balance
Answer : D

27. A machine has an initial value of Rs. 5000, service life of 5 years and final salvage value of Rs. 1000. The annual depreciation cost by straight line method is Rs.
A. 300
B. 600
C. 800
D. 1000
Answer : C

28. Functional depreciation of an equipment is the measure of decrease in its value due to its
A. Ageing
B. Wear and tear
C. Obsolescence
D. Breakdown or accident
Answer : C

29. 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

30. A balance sheet for an industrial concern shows
A. The financial condition at any given time
B. Only current assets
C. Only fixed assets
D. Only current and fixed assets
Answer : A

31. 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

32. Payback period
A. And economic life of a project are the same
B. Is the length of time over which the earnings on a project equals the investment
C. Is affected by the variation in earnings after the recovery of the investment
D. All (A), (B) and (C)
Answer : B

33. Which of the following is not a mathematical method for evaluation of profitability of a chemical process plant?
A. Cash reserve
B. Rate of return on investment
C. Payout period
D. Discounted cash flow based on full life performance
Answer : A

34. 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

35. Construction expenses are roughly __________ percent of the total direct cost of the plant.
A. 2
B. 10
C. 30
D. 50
Answer : B

36. In an ordinary chemical plant, electrical installation cost may be about
A. 10-15% of purchased equipment cost
B. 3-10% of fixed capital investment
C. Either (A) or (B)
D. Neither (A) nor (B)
Answer : C

37. Pick out the wrong statement.
A. Longer tubes are less expensive per unit heat transfer area as compared to shorter tubes
B. A cost index is merely a number for a given year showing the cost at that time relative to a certain base year
C. Turnover ratio of a chemical plant is the ratio of gross annual sales to the fixed capital investment
D. Plates with butt welded joints are less expensive compared to lap welded joints, because squaring of plates is not necessary
Answer : D

38. 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

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. 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
A. Decreases
B. Increases
C. Increases linearly
D. Remain constant
Answer : A

41. Opeating 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

42. 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

43. Out of the following, the depreciation calculated by the __________ method is the maximum.
A. Diminishing balance
B. Straight line
C. Sum of the years digit
D. Sinking fund
Answer : A

44. 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

45. __________ method for profitability evaluation of a project does not account for investment cost due to land.
A. Net present worth
B. Pay out period
C. Discounted cash flow
D. Rate of return on investment
Answer : B

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

47. Direct costs component of the fixed capital consists of
A. Contingencies
B. Onsite and offsite costs
C. Labour costs
D. Raw material costs
Answer : B

48. In a manufacturing industry, breakeven point occurs, when the
A. Total annual rate of production equals the assigned value
B. Total annual product cost equals the total annual sales
C. Annual profit equals the expected value
D. Annual sales equals the fixed cost
Answer : B

49. 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

50. 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