ENS191 QUIZ 2

Question 1

It refers to wealth in the form of money or property that can be used to produce more wealth.

Answer 1

Capital

Question 2

It has a time value.

Answer 2

Money

Question 3

These are those unaffected by changes of inactivity level over a feasible range of operations for the capacity or capability available.

Answer 3

Fixed Costs

Question 4

It does not change with an increase or decrease in the amount of goods and services.

Answer 4

Fixed Costs

Question 5

Example of Fixed Costs

Answer 5

rent for buildings or spaces, salaries for management and administrative employees, property taxes, insurance

Question 6

What are the four types of cost?

Answer 6

1. Fixed Costs
2. Variable Costs
3. Direct Costs
4. Indirect Costs

Question 7

These are those associated with an operation that varies in total with the quantity of output or other measures of activity level.

Answer 7

Variable Costs

Question 8

This is the corporate expense that changes in proportion to production volume.

Answer 8

Variable Costs

Question 9

Examples of Variable Costs

Answer 9

cost of raw materials and packaging, sales commission, utility costs (electricity, water, etc.), direct labor costs (regular working hours, overtime)

Question 10

These are costs that can be reasonably measured and allocated to a specific output or work activity.

Answer 10

Direct Costs

Question 11

The labor and material costs directly associated with a product, service, or construction activity are _____.

Answer 11

Direct Costs

Question 12

Examples of Direct Costs

Answer 12

raw materials cost, wages for production staff, manufacturing supplies

Question 13

These are costs that are difficult to allocate to a specific output or work activity.

Answer 13

Indirect Costs

Question 14

Normally, they are costs allocated through a selected formula (such as proportional to direct labor hours, direct labor dollars, or direct material dollars) to the outputs or work activities.

Answer 14

Indirect Costs

Question 15

It can also be called overhead costs.

Answer 15

Indirect Costs

Question 16

Examples of Indirect Costs

Answer 16

salary for administrative employees, general repairs, taxes and fees

Question 17

It is an integral part in any engineering economic analysis being performed which requires the participation from engineering designers, marketing, manufacturing, finance and top management.

Answer 17

Cost Estimation

Question 18

You review the overall scope of your project, identify the major elements of the work and make general estimations.

Answer 18

Top-Down Approach

Question 19

Key Characteristics:
* frequently used for creating rough order of magnitude (ball-park)
* used at the early stage of the project when data is limited (to be further used for data validation)
* generally takes less time and effort to produce
* uses historical data from similar projects to estimate costs, revenues, energy consumption, etc.
* generally produces larger estimates

Answer 19

Top-Down Approach

Question 20

You generate a detailed breakdown of the requirements down to the lowest possible level to generate your estimates. This approach covers the project scope based on the task defined.

Answer 20

Bottom-Up Approach

Question 21

Key Characteristics:
* frequently referred to as detailed estimating or as an engineering build-up
* usually works best when the detail concerning the desired output (a product or a service) has been defined and clarified
* generates more tangible estimates than top-down approach
* higher risk of excluding allowance for additional work needed

Answer 21

Bottom-Up Approach

Question 22

It is an indispensable tool for clarifying and visualizing a series of cash flows.

Answer 22

Cash Flow Diagram

Question 23

It is a graphical representation of cash flows drawn on a time scale.

Answer 23

Cash Flow Diagram

Question 24

Total interest earned or charged is linearly proportional to the initial amount loaned (principal).

Answer 24

Simple Interest

Question 25

It is calculated using the principal only, ignoring any interest accrued in preceding interest periods.

Answer 25

Simple Interest

Question 26

It is infrequently used in modern practice.

Answer 26

Simple Interest

Question 27

It is computed on the basis of 12 months of 30 days each or 360 days a year; 1 interest period = 360 days

Answer 27

Ordinary Simple Interest

Question 28

It is computed based on the exact number of days in a year, 365 days for an ordinary year and 366 days for a leap year.

Answer 28

Exact Simple Interest

Question 29

It reflects both the remaining principal and any accumulated interest.

Answer 29

Compound Interest

Question 30

It is commonly used in personal and professional financial transactions.

Answer 30

Compound Interest

Question 31

It is a rate of interest that specifies the rate of interest and a number of interest periods.

Answer 31

Nominal rate of interest

Question 32

It is rates of interest that specifies the actual or exact rate of interest on the principal.

Answer 32

Effective rate of interest

Question 33

Interest is compounded at the end of each finite length period, such as a month, a quarter or a year.

Answer 33

Discrete Compounding

Question 34

It is assumed that cash payments occur once per year, but the compounding is continuous throughout the year.

Answer 34

Continuous Compounding

Question 35

The difference between the present worth (the amount received for the paper in cash) and the worth of the paper at sometime in the future (the face value of the paper or principal).

Answer 35

Discount

Question 36

The increase in the prices for goods and services from one year to another, thus decreasing the purchasing power of money.

Answer 36

Inflation

Question 37

It measures the value of a currency in terms of the quantity and quality of goods or services that one unit of money will purchase.

Answer 37

Purchasing power of money.