Chemical Engineering Plant Economics MCQ Solved Paper for CTET

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

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. 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

11. 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

12. 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

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

14. 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

15. 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

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

17. 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

18. 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

19. 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

20. 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

21. 'Lang factor' is defined as the ratio of the capital investment to the delivered cost of major equipments. The value of 'Lang factor' for fixed capital investment, for a solid-fluid processing chemical plant ranges from
A. 1.2 to 1.4
B. 2.5 to 2.7
C. 4.2 to 4.4
D. 6.2 to 6.4
Answer : C

22. __________ 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

23. 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

24. 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

25. 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

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

27. 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

28. 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

29. 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

30. 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

31. 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

32. 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

33. 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

34. 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

35. 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

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

37. 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

38. 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

39. 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

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

41. 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

42. 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

43. 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

44. 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

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. 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

47. 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

48. 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

49. 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

50. 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