Economics of Plant and Process Design pdf - Set 08 - ObjectiveBooks
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Economics of Plant and Process Design pdf - Set 08

Practice Test: Question Set - 08

1. 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 realization (NSR) at breakeven point

2. 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

3. 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

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

5. 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

6. 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

7. __________ 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)

8. Manufacturing cost in a chemical company does not include the
    (A) Fixed charges
    (B) Plant overheads
    (C) Direct products cost
    (D) Administrative expenses

9. Personnel working in the market research group is responsible for the job of
    (A) Equipment selection
    (B) Product evaluation
    (C) Equipment design
    (D) Cost estimation

10. Functional depreciation of an equipment is the measure of decrease in its value due to its
    (A) Ageing
    (B) Wear and tear
    (C) Obsolescence
    (D) Breakdown or accident

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