Chemical Engineering Plant Economics 1000+ MCQ with answer for RBI Assistant

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

2. 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

3. 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

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

5. '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

6. 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

7. 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

8. 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

9. 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

10. __________ of depreciation calculation does not take into account the interest on investments.
A. Present worth method
B. Sinking fund method
C. Sum of the years-digits method
D. All (A), (B) and (C)
Answer : C

11. 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

12. 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

13. 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

14. 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

15. 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

16. A series of equal payments (e.g., deposit or cost) made at equal intervals of time is known as
A. Perpetuity
B. Capital charge factor
C. Annuity
D. Future worth
Answer : C

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

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. 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

41. 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

42. 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

43. 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

44. 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

45. 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

46. 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

47. __________ 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

48. 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

49. 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

50. 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