Chemical Engineering Plant Economics MCQ Solved Paper for JEE Main

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

2. 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

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

4. 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

5. 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

6. '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

7. 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

8. 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

9. 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

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

11. 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

12. 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

13. '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

14. 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

15. 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

16. 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

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

18. 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

19. 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

20. 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

21. 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

22. 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

23. '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

24. 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

25. 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

26. 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

27. 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

28. 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

29. __________ 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

30. 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

31. __________ 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

32. 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

33. 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

34. 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

35. 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

36. 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

37. 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

38. 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

39. 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

40. 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

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. 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

43. 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

44. 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

45. 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

46. __________ 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

47. 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

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

49. 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

50. 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