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

1. 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

2. 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

3. 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

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

5. 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

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

7. Depreciation
A. Costs (on annual basis) are constant when the straight line method is used for its determination
B. Is the unavoidable loss in the value of the plant, equipment and materials with lapse in time
C. Does figure in the calculation of income tax liability on cash flows from an investment
D. All (A), (B) and (C)
Answer : D

8. Pick out the wrong statement.
A. Gross revenue is that total amount of capital received as a result of the sale of goods or service
B. Net revenue is the total profit remaining after deducting all costs excluding taxes
C. The ratio of immediately available cash to the total current liabilities is known as the cash ratio
D. 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
Answer : B

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. Optimum number of effects in a multiple effect evaporator is decided by the
A. Cost benefit analysis
B. Floor area availability
C. Terminal parameters
D. Evaporation capacity required
Answer : A

17. 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

18. 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

19. 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

20. Which of the following does not come under the sales expenses for a product of a chemical plant?
A. Advertising
B. Warehousing
C. Legal fees
D. Customer service
Answer : C

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. The amount of simple interest during 'n' interest period is (where, i = interest rate based on the length of one interest period, p = principal)
A. p.i.n.
B. p(1 + i.n)
C. p(1 + i)n
D. p(1 - i.n)
Answer : A

29. 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

30. The payback method for the measurement of return on investment
A. Gives a correct picture of profitability
B. Underemphasises liquidity
C. Does not measure the discounted rate of return
D. Takes into account the cash inflows after the recovery of investments
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. For a given fluid, as the pipe diameter increases, the pumping cost
A. Decreases
B. Increases
C. Remains the same
D. May increase or decrease, depending upon whether the fluid is Newtonian or non-Newtonian
Answer : A

33. 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

34. A present sum of Rs. 100 at the end of one year, with half yearly rate of interest at 10%, will be Rs.
A. 121
B. 110
C. 97
D. 91
Answer : A

35. 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

36. 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

37. 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

38. '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

39. 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

40. Pick out the wrong statement.
A. The annual depreciation rate for machinery and equipments in a chemical process plant is about 10% of the fixed capital investment
B. Annual depreciation rate of buildings in a chemical plant is about 3% of its initial cost
C. Insurance rates on annual basis in a chemical plant may be about 1% of the fixed capital investment
D. In a chemical industry, research and development cost amounts to about 15% of net sales realisation (NSR)
Answer : D

41. Which of the following is not a component of the working capital for a chemical process plant?
A. Product inventory
B. In-process inventory
C. Minimum cash reserve
D. Storage facilities
Answer : D

42. 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

43. Effective and nominal interest rates are equal, when the interest is compounded
A. Annually
B. Fortnightly
C. Monthly
D. Half-yearly
Answer : A

44. '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

45. 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

46. Equipment installation cost in a chemical process plant ranges from __________ percent of the purchased equipment cost.
A. 10 to 20
B. 35 to 45
C. 55 to 65
D. 70 to 80
Answer : B

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

48. Which of the following is not a current asset of a chemical company?
A. Inventories
B. Marketable securities
C. Chemical equipments
D. None of these
Answer : C

49. 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
A. R [{(1 + i)ⁿ - 1}/ i ]
B. R [{(1 + i)ⁿ - 1}/ i (1 + i)ⁿ]
C. R(1 + i)ⁿ
D. R/(1 + i)ⁿ
Answer : B

50. The amount of compounded interest during 'n' interest periods is
A. p[(1+i)ⁿ - 1)]
B. p(1 + i)ⁿ
C. p(1 - i)ⁿ
D. p(1 + iⁿ)
Answer : A