Objective Type Questions on Engineering Economy – Set 03

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Q1. Pick up the main purpose of project cost control from the following:

(A) To signal immediate warning of uneconomic operations
(B) To provide a feed back to the estimator
(C) To promote cost consciousness
(D) All of these

Answer: (D) All of these

Q2. The construction manager uses the estimate of the project

(A) To tell the owner of the project to take his/her financial decision
(B) To control the project during its construction
(C) To develop bids on the project
(D) All of these

Answer: (D) All of these

Q3. Which one of the following definitions is correct?

(A) The ratio of total debt to share holder’s equity is called ‘debt ratio’
(B) The ratio debt-to-total assets is called Debt-to-total assets ratio
(C) The ratio of earnings before interest and taxes for a particular reporting period to the amount of interest charges for the period is called interest coverage ratio
(D) All of these

Answer: (D) All of these

Q4. Keeping in view, the feasibility order of magnitude, the preliminary, conceptual or budget estimates, are prepared by:

(A) Architect/engineer
(B) Construction manager
(C) Owner himself/herself
(D) Construction manager

Answer: (C) Owner himself/herself

Q5. Pick up the correct statement from the following:

(A) A NPV profile graph shows the curvilinear relationship between the net present value of the project and discount rate employed
(B) In a NPV profile, if discount rate is zero, then net present value is simply total cash inflows less the total cash outflows of the project
(C) As the discount rate increases, the net present value profile slopes downward to the right
(D) All of these

Answer: (D) All of these

Q6. A construction estimate is used

(A) To judge tentatively or approximate value of the project
(B) To produce a statement of the approximate cost
(C) To decide an approximation of the value of the project and not the exact cost
(D) None of these

Answer: (C) To decide an approximation of the value of the project and not the exact cost)

Q7. Pick up the correct statement from the following:

(A) Over head rate = total over head in rupees for period/Direct labour in rupees for period
(B) Over head cost per unit = Overhead ratio × direct labour cost/unit
(C) Both (a) and (b)
(D) Neither (a) nor (b)

Answer: (C) Both (a) and (b)

Q8. The person desires to pay off the amount in 10 equal annual instalments. The amount of each installment is:

(A) Rs. 5638
(B) Rs. 6638
(C) Rs. 7738
(D) None of these

Answer: (A) Rs. 5638

Q9. If ‘a’ is the base amount expenditure, ‘b’ is the increase in the operation cost each year over a period of’ ‘n’ years, the total cost of maintenance is:

(A) a + (n + 1) b
(B) a + (n – 1) b
(C) a × (n – 1) b
(D) a – (n – 1) b

Answer:(B) a + (n – 1) b

Q10. Pick up the correct statement from the following:

(A) The financial ratio summarizes some aspect of the firm’s financial condition at the time of preparing a balance sheet
(B) Both the numerator and denominator of financial ratios come directly from the balance sheet
(C) Income statement ratios compare a flow item from the income statement to another flow item form the income statement
(D) All of these

Answer: (D) All of these

Q11. If ‘S’ is the future capital accumulated in ‘n’ years at the rate of interest ‘I’ per annum, then present worth is:

(A) S/(1 + i)n
(B) S (1 + i)n
(C) S (1 + i)1/n
(D) None of these

Answer: (A) S/(1 + i)n

Q12. Liquidity ratios are used:

(A) To measure a firm’s ability to meet short-cut obligations
(B) To compare short term obligations to short-term resources available to meet these obligations
(C) To obtain much insight into the present cash solvency of the firm and the firm’s ability to remain solvent in the event of adversity
(D) All of these

Answer: (D) All of these

Q13. The wages of supervisors and material handlers are charged as:

(A) Over head
(B) Direct labour cost
(C) Indirect labour cost
(D) None of these

Answer:(A) Over head

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