INDIABIX-PLANT ECONOMICS

Question 1

Direct costs component of the fixed capital consists of

contingencies
onsite and offsite costs
labour costs
raw material costs

Answer 1

onsite and offsite costs

Question 2

Out of the following, the depreciation calculated by the __________ method is the maximum.

diminishing balance
straight line
sum of the years digit
sinking fund

Answer 2

diminishing balance

Question 3

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.

0.1 to 1
1 to 2
10 to 20
50 to 60

Answer 3

10 to 20

Question 4

Utilities cost in the operation of chemical process plant comes under the

plant overhead cost
fixed charges
direct production cost
general expenses

Answer 4

direct production cost

Question 5

__________ method for profitability evaluation of a project does not account for investment cost due to land.

Net present worth
Pay out period
Discounted cash flow
Rate of return on investment

Answer 5

Pay out period

Question 6

Nominal and effective interest rates are equal, when the interest is compounded

quarterly
semi-annually
annually
in no case, they are equal

Answer 6

annually

Question 7

Which of the following elements is not included in the scope of market analysis?

Competition from other manufactures.
Product distribution.
Opportunities
Economics

Answer 7

Economics

Question 8

Which of the following is not a component of working capital?

Raw materials is stock.
Finished products in stock.
Transportation facilities.
Semi-finished products in the process.

Answer 8

Transportation facilities.

Question 9

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.

Answer 9

C) annual depreciation is the fixed percentage of the property value at the beginning of the particular year.

Question 10

For a given fluid, as the pipe diameter increases, the pumping cost

decreases.
increases.
remains the same.
may increase or decrease, depending upon whether the fluid is Newtonian or non-Newtonian.

Answer 10

decreases.

Question 11

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

Thermal
Nuclear
Hydroelectric
Fast breeder reactor

Answer 11

Hydroelectric

Question 12

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 12

A) profit before interest and tax i.e., net profit + interest + tax

Question 13

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.

Answer 13

B) total annual product cost equals the total annual sales.

Question 14

Gross earning is equal to the total income minus

total product cost
fixed cost
income tax
none of these

Answer 14

total product cost

Question 15

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.

Answer 15

D)time of starting of job and also about how much work should be completed during a particular period.

Question 16

The inventory of raw materials included in the working capital is usually about __________ months supply of raw materials valued at delivery prices.

one
three
six
twelve

Answer 16

one

Question 17

Which of the following is the costliest material of construction used in pressure vessel construction?

Low alloy steel
Lead
Titanium
High alloy steel

Answer 17

Titanium

Question 18

‘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.

1 to 5
10 to 20
25 to 35
35 to 45

Answer 18

10 to 20

Question 19

__________ taxes are based on gross earnings.

Property
Excise
Income
Capital gain

Answer 19

Income

Question 20

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

Utilities plants.
Maintenance and repair inventory.
Process equipments.
Depreciation.

Answer 20

Maintenance and repair inventory.

Question 21

Six-tenth factor’ rule is used for estimating the

equipment installation cost.
equipment cost by scaling.
cost of piping.
utilities cost.

Answer 21

equipment cost by scaling.

Question 22

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

equipment selection.
product evaluation.
equipment design.
cost estimation.

Answer 22

product evaluation.

Question 23

“Break-even point” is the point of intersection of

fixed cost and total cost.
total cost and sales revenue.
fixed cost and sales revenue.
none of these.

Answer 23

total cost and sales revenue.

Question 24

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 24

C)does not measure the discounted rate of return.

Question 25

Annual depreciation costs are constant, when the __________ method of depreciation calculation is used. declining balance straight line sum of the years digit none of these

Answer 25

straight line

Question 26

Cost incurred towards __________ in a chemical plant is a component of the utilities cost. water supply running a control laboratory property protection medical services

Answer 26

water supply

Question 27

Annual depreciation cost are not constant when, the __________ method of depreciation calculation is used. straight line sinking fund present worth declining balance.

Answer 27

declining balance.

Question 28

Which of the following is not a component of depreciation cost ? Repairs and maintenance cost. Loss due to obsolescence of the equipment. Loss due to decrease in the demand of product. Loss due to accident/breakdown in the machinery.

Answer 28

Repairs and maintenance cost.

Question 29

A series of equal payments (e.g., deposit or cost) made at equal intervals of time is known as perpetuity capital charge factor annuity future worth

Answer 29

annuity

Question 30

A shareholder has __________ say in the affairs of company management compared to a debenture holder. more less same no

Answer 30

more

Question 31

Which of the following is not a component of the working capital for a chemical process plant ? Product inventory. In-process inventory. Minimum cash reserve. Storage facilities.

Answer 31

torage facilities.

Question 32

Which of the following methods of depreciation calculations results in book values greater than those obtained with straight line method ? Multiple straight line method Sinking fund method Declining balance method Sum of the years digit method

Answer 32

Sinking fund method

Question 33

Total product cost of a chemical plant does not include the __________ cost. market survey operating labour, supervision and supplies overhead and utilities depreciation, property tax and insur-rance

Answer 33

market survey

Question 34

Depreciation is __________ in profit with time. decrease increase no change none of these

Answer 34

decrease

Question 35

Gantt chart (or Bar chart) is helpful in efficient utilisation of manpower and machines. preparing production schedule. efficient despatching of products. inventory control.

Answer 35

preparing production schedule.

Question 36

Profit is equal to revenue minus book value total cost operating cost none of these

Answer 36

total cost

Question 37

In financial accounting of a chemical plant, which of the following relationship is invalid? Assets = equities Assets = liabilities + net worth Total income = costs + profits Assets = capital.

Answer 37

Assets = capital.

Question 38

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 manufacturing cost. depreciation by sinking fund method. discrete compound interest. cash ratio.

Answer 38

depreciation by sinking fund method.

Question 39

Which of the following does not come under the sales expenses for a product of a chemical plant ? Advertising Warehousing Legal fees Customer service.

Answer 39

Legal fees

Question 40

Effluent treatment cost in a chemical plant is categorised as the __________ cost. fixed overhead utilities capital

Answer 40

utilities

Question 41

Factory manufacturing cost is the sum of the direct production cost fixed charges and plant overhead cost. and plant overhead cost. plant overhead cost and administrative expenses. none of these.

Answer 41

fixed charges and plant overhead cost.

Question 42

Fixed capital investment of a chemical plant is the total amount of money needed to supply the necessary plant and manufacturing facilities plus the working capital for operation of the facilities. Which of the following components of fixed capital investment requires minimum percentage of it ? Electrical installation cost. Equipment installation cost. Cost for piping. Equipment insulation cost.

Answer 42

Equipment insulation cost.

Question 43

Which of the following is the cheaptest material of construction for the storage of sodium hydroxide upto a concentration of 75% ? Stainless steel Plain carbon steel Nickel Copper

Answer 43

Plain carbon steel

Question 44

The value of a property decreases __________ with time in straight line method of determining depreciation. linearly non-linearily exponentially logarithmically

Answer 44

linearly

Question 45

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 45

a) Cash reserve.

Question 46

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 decreases increases increases linearly remains constant

Answer 46

decreases

Question 47

Optimum economic pipe diameter for fluid is determined by the a) viscosity of the fluid. b) density of the fluid. c) total cost considerations (pumping cost plus fixed cost of the pipe). d) none of these.

Answer 47

c) total cost considerations (pumping cost plus fixed cost of the pipe).

Question 48

Pick out the wrong statement. a) Gross margin = net income - net expenditure b) Net sales realisation (NSR) = Gross sales - selling expenses c) At break even point, NSR is more than the total production cost d) Net profit = Gross margin - depreciation - interest

Answer 48

c) At break even point, NSR is more than the total production cost

Question 49

Which of the following is not a current asset of a chemical company ? Inventories Marketable securities Chemical equipments None of these.

Answer 49

Chemical equipments

Question 50

The __________ of a chemical company can be obtained directly from the balance sheet as the difference between current assets and current liabilities. cash ratio net working capital current ratio liquids assets

Answer 50

net working capital

Question 51

Which of the following ceramic packing materials is the costliest of all ? Berl saddles Raschig rings Pall rings Intalox saddles

Answer 51

Berl saddles

Question 52

Manufacturing cost in a chemical company does not include the fixed charges. plant overheads. direct products cost. administrative expenses.

Answer 52

administrative expenses.

Question 53

Expenditure on research and development (R & D) is categorised as the __________ , while making an estimate of the total product cost for a chemical plant. overhead cost fixed expenses general expenses direct production cost

Answer 53

general expenses

Question 54

For a typical project, the cumulative cash flow is zero at the end of the project life. break even point. start up. end of the design stage.

Answer 54

break even point.

Question 55

'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 1.2 to 1.4 2.5 to 2.7 4.2 to 4.4 6.2 to 6.4

Answer 55

4.2 to 4.4

Question 56

A balance sheet for a chemical plant shows its financial condition at any given date. It does not contain the __________ of the plant. current asset current liability long term debt profit

Answer 56

profit

Question 57

The 'total capital investment' for a chemical process plant comprises of the fixed capital investment and the overhead cost working capital indirect production cost direct production cost

Answer 57

working capital

Question 58

Generally, income taxes are based on the total income gross earning total product cost fixed cost

Answer 58

gross earning

Question 59

A balance sheet for an industrial concern shows the financial condition at any given time. only current assets. only fixed assets. only current and fixed assets.

Answer 59

the financial condition at any given time.

Question 60

Which of the following is not a component of the fixed capital for a chemical plant facility? Raw materials inventory. Utilities plants. Process equipment. Emergency facilities.

Answer 60

Raw materials inventory.

Question 61

Functional depreciation of an equipment is the measure of decrease in its value due to its ageing wear and tear obsolescence breakdown or accident

Answer 61

obsolescence

Question 62

The ratio of gross annual sales to the fixed capital investment is termed as the __________ ratio. cash reserve capital turnover investment

Answer 62

turnover

Question 63

Effective and nominal interest rates are equal, when the interest is compounded annually fortnightly monthly half-yearly

Answer 63

annually

Question 64

Pick out the correct statement. a) Difference between income and expense is termed as gross revenue. b) Unamortized cost is the difference between the original cost of a property and all the depreciation charges made to date. c) Sum-of-the-years-digits methods of depreciation calculation accounts for the interest on the investment. d) Scrap value is the net amount of money obtainable from the sale of used property over and above any charges involved in its removal & sale.

Answer 64

b) Unamortized cost is the difference between the original cost of a property and all the depreciation charges made to date.

Question 65

Optimum number of effects in a multiple effect evaporator is decided by the cost benefit analysis. floor area availability. terminal parameters. evaporation capacity required.

Answer 65

cost benefit analysis.

Question 66

Which of the following is the costliest source of getting hydrogen on commercial scale for the manufacture of nitrogeneous fertiliser ? Coal gasification Steam reforming of naphtha Electrolysis of water Coke oven gas

Answer 66

Electrolysis of water