Chemical Engineering Plant Economics MCQ Solved Paper for FCI Recruitment

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. Annual depreciation cost are not constant when, the __________ method of depreciation calculation is used.
A. Straight line
B. Sinking fund
C. Present worth
D. Declining balance
Answer : D

3. 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

4. __________ 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

5. 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

6. 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

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

8. 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

9. 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

10. 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

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

12. 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

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. Expenditure on research and development (R & D) is categorised 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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

24. A reactor having a salvage value of Rs. 10000 is estimated to have a service life of 10 years. The annual interest rate is 10%. The original cost of the reactor was Rs. 80000. The book value of the reactor after 5 years using sinking fund depreciation method will be Rs.
A. 40,096
B. 43,196
C. 53,196
D. 60,196
Answer : D

25. '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

26. 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

27. 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

28. 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

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

30. 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

31. 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

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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

41. __________ 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

42. 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

43. 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

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. 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

46. 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

47. 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

48. 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

49. 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

50. Which of the following relationship is not correct is case of a chemical process plant?
A. Manufacturing cost = direct product cost + fixed charges + plant overhead costs
B. General expenses = administrative expenses + distribution & marketing expenses
C. Total product cost = manufacturing cost + general expenses
D. Total product cost = direct production cost + plant overhead cost
Answer : D