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Chemical Engineering Plant Economics MCQ Questions & Answers

Chemical Engineering Plant Economics MCQs : This section focuses on the "Chemical Engineering Plant Economics". These Multiple Choice Questions (MCQs) should be practiced to improve the Chemical Engineering Plant Economics skills required for various interviews (campus interview, walk-in interview, company interview), placement, entrance exam and other competitive examinations.

Question 1

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

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Question 2

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.

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Question 3

Construction expenses are roughly __________ percent of the total direct cost of the plant.

A. 2
B. 10
C. 30
D. 50

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Question 4

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

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Question 5

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.

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Question 6

"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.

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Question 7

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).

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Question 8

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.

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Question 9

In a manufacturing industry, break even 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.

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Question 10

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

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Question 11

Personnel working in the market research group is reponsible for the job of

A. equipment selection.
B. product evaluation.
C. equipment design.
D. cost estimation.

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Question 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

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Question 13

In declining balance method of depreciation calculation, the

A. value of the asset decreases linearly with time.
B. annual cost of depreciation is same every year.
C. annual depreciation is the fixed percentage of the property value at the beginning of the particular year.
D. none of these.

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Question 14

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.

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Question 15

__________ 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

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Question 16

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.

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Question 17

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.

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Question 18

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

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Question 19

The ratio of working capital to total capital investment for most chemical plants (except for non-seasonal 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

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Question 20

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 turn over ratio = sales/net working capital.
D. Total cost of production is more than net sales realisation (NSR) at break even point.

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Question 21

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

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Question 22

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

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Question 23

Which of the following is a component of working capital investment ?

A. Utilities plants.
B. Maintenance and repair inventory.
C. Process equipments.
D. Depreciation.

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Question 24

'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.

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Question 25

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. Turn over 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.

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Question 26

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

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Question 27

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

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Question 28

In which of the electric power generation system, the operating cost is minimum ?

A. Thermal
B. Nuclear
C. Hydroelectric
D. Fast breeder reactor

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Question 29

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.

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Question 30

'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. l to 5
B. 10 to 20
C. 25 to 35
D. 35 to 45

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Question 31

__________ taxes are based on gross earnings.

A. Property
B. Excise
C. Income
D. Capital gain

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Question 32

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.

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Question 33

If the interest rate of 10% per period is compounded half yearly, the actual annual return on the principal will be __________ percent.

A. 10
B. 20
C. >20
D. < 20

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Question 34

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

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Question 35

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

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Question 36

__________ of depreciation calculation accounts for the interest on investement.

A. Straight line method
B. Declining balance
C. both (a) and (b)
D. neither (a) nor (b).

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Question 37

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. 1.50%
D. 150%

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Question 38

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

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Question 39

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).

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Question 40

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).

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Question 41

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

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Question 42

Direct costs component of the fixed capital consists of

A. contingencies
B. onsite and offsite costs
C. labour costs
D. raw material costs

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Question 43

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.

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Question 44

Gross earning is equal to the total income minus

A. total product cost
B. fixed cost
C. income tax
D. none of these

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Question 45

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

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Question 46

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

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Question 47

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.

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Question 48

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

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Question 49

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.

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