Chemical Engineering Plant Economics 1000+ MCQ with answer for DRDO

1. 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

2. 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

3. 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

4. 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

5. 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

6. The total investment in a project is Rs. 10 lakhs and the annual profit is 1.5 lakhs. If the project life is 10 years, then the simple rate of return on investment is
A. 15%
B. 10%
C. 1.5%
D. 150%
Answer : C

7. __________ 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

8. 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

9. 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

10. Gross earning is equal to the total income minus
A. Total product cost
B. Fixed cost
C. Income tax
D. None of these
Answer : A

11. 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

12. 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

13. 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

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. 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

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

17. 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

18. 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

19. 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

20. 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

21. Expenditure on research and development (R & D) iscategorised 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

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

29. 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

30. 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

31. 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

32. 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

33. 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

34. __________ 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

35. 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

36. 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

37. 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

38. 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

39. A balance sheet for a chemical plant shows its financial condition at any given date. It does not contain the __________ of the plant.
A. Current asset
B. Current liability
C. Long term debt
D. Profit
Answer : D

40. 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

41. 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

42. 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

43. Pick out the wrong statement.
A. Gross margin = net income - net expenditure
B. Net sales realisation (NSR) = Gross sales - selling expenses
C. At breakeven point, NSR is more than the total production cost
D. Net profit = Gross margin - depreciation - interest
Answer : C

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

45. '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

46. 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

47. 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

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

49. 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

50. 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