Chemical Engineering Plant Economics MCQ Solved Paper for SSC MTS

1. Which of the following is not a component of the working capital for a chemical process plant?
A. Product inventory
B. In-process inventory
C. Minimum cash reserve
D. Storage facilities
Answer : D

2. An investment of Rs. 100 lakhs is to be made for construction of a plant, which will take two years to start production. The annual profit from the operation of the plant is Rs. 20 lakhs. What will be the payback time?
A. 5 years
B. 7 years
C. 12 years
D. 10 years
Answer : B

3. 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

4. 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

5. '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

6. 'P' is the investment made on an equipment, 'S' is its salvage value and 'n is the life of the equipment in years. The depreciation for Rath year by the sum-of years digit method will be
A. (P - S)/n
B. 1 - (P/S)^1/m
C. (m/n) (P - S)
D. [2 (n - m + 1)/n(n + 1)]. (P - S)
Answer : D

7. 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

8. 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

9. The 'total capital investment' for a chemical process plant comprises of the fixed capital investment and the
A. Overhead cost
B. Working capital
C. Indirect production cost
D. Direct production cost
Answer : B

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

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

18. 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

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

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

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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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

32. __________ 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

33. 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

34. 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

35. 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

36. 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

37. __________ 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

38. 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

39. 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

40. 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

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

42. 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

43. 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

44. 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

45. 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

46. 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

47. 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

48. 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

49. 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

50. 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