Chemical Engineering Plant Economics 1000+ MCQ with answer for GRE

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

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

14. Scheduling provides information about the
A. Proper utilisation of machines
B. Means to minimise idle time for machines
C. Time of completion of job
D. Time of starting of job and also about how much work should be completed during a particular period
Answer : D

15. 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

16. 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

17. Accumulated sum at the end of 5 years, if Rs. 10000 is invested now at 10% interest per annum on a compound basis is Rs.
A. 15000
B. 16105
C. 18105
D. 12500
Answer : B

18. 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

19. 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

20. 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

21. 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

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

23. 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

24. 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

25. 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

26. 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

27. Cost of instrumentation in a modern chemical plant ranges from __________ percent of the total plant cost.
A. 5 to 10
B. 20 to 30
C. 40 to 50
D. 60 to 70
Answer : B

28. 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

29. 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

30. __________ 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

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

40. 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

41. 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

42. 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

43. Which of the following methods of depreciation calculations results in book values greater than those obtained with straight line method?
A. Multiple straight line method
B. Sinking fund method
C. Declining balance method
D. Sum of the years digit method
Answer : B

44. 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

45. 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

46. 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

47. 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

48. 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

49. 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 × (index value at present/ index value at time original cost was obtained). The most major component of this cost index is
A. Fabricated equipment and machinery
B. Process instruments and control
C. Pumps and compressor
D. Electrical equipments and material
Answer : A

50. 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