# MCQs in Engineering Economics Part XVII

Compiled MCQs in Engineering Economics Part 17 of the series as one topic in General Engineering and Applied Sciences (GEAS) in the ECE Board Exam.

This is the Multiples Choice Questions Part 17 of the Series in Engineering Economics as one of the General Engineering and Applied Sciences (GEAS) topic. In Preparation for the ECE Board Exam make sure to expose yourself and familiarize in each and every questions compiled here taken from various sources including past Board Questions in General Engineering and Applied Sciences (GEAS), Engineering Economy Books, Journals and other Engineering Economy References.

### Online Questions and Answers in Engineering Economics Series

Following is the list of multiple choice questions in this brand new series:

Engineering Economics MCQs
PART 1: MCQs from Number 1 – 50                        Answer key: PART I
PART 2: MCQs from Number 51 – 100                   Answer key: PART II
PART 3: MCQs from Number 101 – 150                 Answer key: PART III
PART 4: MCQs from Number 151 – 200                 Answer key: PART IV
PART 5: MCQs from Number 201 – 250                 Answer key: PART V
PART 6: MCQs from Number 251 – 300                 Answer key: PART VI
PART 7: MCQs from Number 301 – 350                 Answer key: PART VII
PART 8: MCQs from Number 351 – 400                 Answer key: PART VIII
PART 9: MCQs from Number 401 – 450                 Answer key: PART IX
PART 17: MCQs from Number 801 – 850                 Answer key: PART XVII

### Continue Practice Exam Test Questions Part XVII of the Series

Choose the letter of the best answer in each questions.

801. An item is purchased for P100,000. Annual cost is P18,000. Using interest rate of 8%, what is the capitalized cost of perpetual service?

• A. P310,000
• B. P315,000
• C. P320,000
• D. P325,000

802. A corporation uses a type of motor which costs P5,000 with 2 life years and final salvage value of P800. How much could the corporation afford to pay for another type of motor of the same purpose whose life is 3 years a with a final salvage value of P1,000. Money is worth 4%.

• A. P7,892.13
• B. P7,157.40
• C. P7,489.21
• D. P7,300.12

803. A motorcycle costs P50,000 and has an expected life of 10 years. The salvage value is estimated to be P2,000 and annual operating cost is estimated at P1,000. What is the appropriate rate of return on the investment if the annual revenue is P10,000?

• A. 12.12%
• B. 12.54%
• C. 12.72%
• D. 12.99%

804. At 6%, find the capitalized cost of a bridge whose cost is P250M and life is 20 years, if the bridge must be partially rebuilt at a cost of P100M at the end of each 20 years.

• A. P297,308,323.10
• B. P298,308,323.10
• C. P296,308,323.10
• D. P295,308,323.10

805. A new broiler was installed by a textile plant at a total cost of P300,000 and projected to have a useful life of 15 years. At the end of its useful life, it is estimated to have a salvage value of P30,000. Determine its capitalized cost if interest is 18% compounded annually.

• A. P323,500.33
• B. P322,549.33
• C. P332,509.33
• D. P341,240.33

806. A man planned of building a house. The cost of construction is P500,000 while annual maintenance cost is estimated at P10,000. If the interest rate is 6%, what is the capitalized cost of the house?

• A. P666,000.00
• B. P666,666.67
• C. P633,333.33
• D. P650,000.00

807. An untreated electrical wooden pole that will last 10 years under a certain soil condition, costs P1,200.00. If a treated pole will last for 20 years, what is the maximum justifiable amount that can be paid for the treated pole, if the maximum return on investment is 12%. Consider annual taxes and insurance amount to be 1% of the first cost.

• A. P1,612.01
• B. P1,559.50
• C. P1,789.23
• D. P1,409.38

808. A granite quarry purchased for P1,600,000 is expected to be exhausted at the end of 4 years. If the resale value of the land is P100,000, what annual income is required to yield an investment rate of 12%? Use a sinking fund rate of 3%.

• A. P550,540.57
• B. P551,540.57
• C. P552,540.57
• D. P553,540.57

809. A manufacturer produces certain items at a labor cost per unit of P315, material cost per unit is P100, variable cost of P3.00 each. If the item has a selling price of P995, how many units must be manufactured each month for the manufacturer to breakeven if the monthly overhead is P461,600?

• A. 782
• B. 800
• C. 806
• D. 812

810. The annual maintenance cost of a machine shop is P69,994. If the cost of making a forging is P56 per unit and its selling price is P135 per forged unit, find the number of units to be forged to break-even.

• A. 892
• B. 870
• C. 886
• D. 862

811. A manufacturer produces certain items at a labor cost of P115 each, material cost of P76 each and variable cost of P2.32 each. If the item has a unit price of P600, how many units must be manufactured each month for the manufacturer to break even if the monthly overhead is P428,000.

• A. 1,033
• B. 1,037
• C. 1,043
• D. 1,053

812. Steel drum manufacturer incurs a yearly fixed operating cost of \$200,000. Each drum manufactured cost \$160 to produce and sells \$200. What is the manufacturer’s break-even sales volume in drums per year?

• A. 5,031
• B. 5,017
• C. 5,043
• D. 5,000

813. XYZ Corporation manufactures bookcases that sell for P65.00 each. It costs XYZ corporation P35,000 per year to operate its plant. This sum includes rent, depreciation charges on equipment, and salary payments. If the cost to produce one bookcase is P50.00, how many cases must be sold each year for XYZ to avoid taking a loss?

• A. 2,334
• B. 2,443
• C. 2,223
• D. 2,322

814. A company which manufactures electric motors has a production capacity of 200 motors a month. The variable costs are P150.00 per motor. The average selling price of the motors is P275.00. Fixed costs of the company amount to P20,000 per month which includes taxes. Find the number of motors that must be sold each month to breakeven.

• A. 160
• B. 157
• C. 153
• D. 163

815. The annual maintenance cost of a machine is P70,000. If the cost of making a forging is P56 and its selling price is P125 per forged unit. Find the number of units to be forged to breakeven.

• A. 1,000
• B. 1,012
• C. 1,015
• D. 1,018

816. A manufacturing firm maintains one product assembly line to produce signal generators. Weekly demand for the generators is 35 units. The line operates for 7 hours per day, 5 days per week. What is the maximum production time per unit in hours required of the line to meet the demand?

• A. 1.0 hours per unit
• B. 1.2 hours per unit
• C. 1.4 hours per unit
• D. 1.6 hours per unit

817. Compute the number of blocks that an ice plant must be able to sell per month to break even based on the following data:

Cost of electricity per block - P20.00

Tax to be paid per block - P2.00

Real Estate Tax - P3,500.00 per month

Salaries and Wages - P25,000.00 per month

Others - P12,000.00 per month

Selling price of ice - P55.00 per block

• A. 1,220
• B. 1,224
• C. 1,228
• D. 1,302

818. JRT Industries manufactures automatic voltage regulators at a labor cost of P85.00 per unit and material cost of P350.00 per unit. The fixed charges on the business are P15,000 per month and the variable costs are P20.00 per unit. If the automatic voltage regulators are sold to retailers at P580.00 each, how many units must be produced and sold per month to breakeven?

• A. 120
• B. 124
• C. 128
• D. 130

819. General Electric Company which manufactures electric motor has a capacity of producing 150 motors a month. The variable costs are P4,000.00 per month, the average selling price of the motor is P750.00 per motor. Fixed costs of the company amount to P78,000.00 per month which includes all taxes. Determine the number of motors to be produced per month to breakeven.

• A. 100
• B. 104
• C. 110
• D. 112

820. A telephone switchboard 100 pair cable can be made up with either enamelled wire or tinned wire. There will be 400 soldered connections. The cost of soldering a connection on the enamelled wire will be P1.65, on the tinned wire, it will be P1.15. A 100-pair cable made up with enamelled wire cost P0.55 per linear foot and those made up of tinned wire cost P0.75 per linear foot. Determine the length of cable run in feet so that the cost of each installation would be the same.

• A. 1,000 feet
• B. 1,040 feet
• C. 1,100 feet
• D. 1,120 feet

821. A local factory assembling calculators produces 400 units per month and sells them at P1,800 each. Dividends are 8% on the 8,000 shares with par value of P250 each. The fixed operating cost per month is P25,000. Other costs are P1,000 per unit. If 200 units were produced a month, determine the profit or loss.

• A. Profit of P121,666.67
• B. Profit of P21,666.67
• C. Loss of P121,666.67
• D. Loss of P21,666.67

822. Nike shoes manufacturer produces a pair of Air Jordan Shoes at a labor cost of P900.00 a pair and a material cost of P800.00 a pair. The fixed charges on the business are P5,000,000 a month and the variable costs are P400.00 a pair. Royalty to Michael Jordan is P1,000 per pair of shoes sold. If the shoes sell at P5,000 a pair, how many pairs must be produced each month for the manufacturer to breakeven?

• A. 2,590
• B. 2,632
• C. 2,712
• D. 2,890

823. In a steel fabrication shop located somewhere in Cebu, various size rivet holes must be made in structural members. This may be done by laying out the position of the hole on the members and using a drill press for this method, a machinist wage rate is P20.25 per hour and he can drill 27 holes per hour. An alternative method is by the use of the multiple punch machine. In this process, the machinist wage rate is P20.00 per hour and he can complete 8 holes per minute. This method requires P0.50 per holes to set the multiple punch machine and an installation cost of P2,000.00. If all other costs are the same, for what number of rivet holes will the multiple punch machine pay for itself?

• A. 9,601
• B. 9,592
• C. 9,581
• D. 9,566

824. A new civil engineer produces a certain construction material at a labor cost of P16.20 per piece, material cost of P38.50 per piece and variable cost of P7.40 per piece. The fixed charge on the business is P100,000.00 per month. If he sells the finished product at P95.00 each, how many pieces must be manufactured in each month to breakeven?

• A. 3,045
• B. 3,035
• C. 3,030
• D. 3,040

825. The Asian Transmission Co. makes and sells certain automotive parts. Present sales volume is 500,000 units per year at a selling price of fifty centavos (P0.50) per unit. Fixed expenses total P80,000.00 per year. What is the present total profit for a year?

• A. P168,000
• B. P170,000
• C. P172,000
• D. P174,000

826. The Asian Transmission Co. makes and sells certain automotive parts. Present sales volume is 500,000 units per year at a selling price of fifty centavos (P0.50) per unit. Fixed expenses total P80,000.00 per year. What is the present breakeven point in units?

• A. 160,000
• B. 162,000
• C. 165,000
• D. 170,000

827. A factory engaged in the fabrication of an automobile part with a production capacity of 700,000 units per year is only operating at 62% of capacity due to unavailability of the necessary foreign currency to finance the importation of their raw materials. The annual income is P430,000.00. Annual fixed costs are P190,000.00 and the variable costs are P0.348 per unit. What is the current profit or loss?

• A. P87,450
• B. P88,960
• C. P88,450
• D. P87,960

828. A factory engaged in the fabrication of an automobile part with a production capacity of 700,000 units per year is only operating at 62% of capacity due to unavailability of the necessary foreign currency to finance the importation of their raw materials. The annual income is P430,000.00. Annual fixed costs are P190,000.00 and the variable costs are P0.348 per unit. What is the breakeven point?

• A. 294,560
• B. 291,000
• C. 290,780
• D. 295,490

829. A certain firm has the capacity to produce 650,000 units of product per year. At present, it is operating at 62% capacity. The firm’s annual income is P4,160,000.00. Annual fixed costs are P1,920,000.00 and the variable costs are equal to P3.56 per unit of product. What is the firm’s annual profit or loss?

• A. P814,320
• B. P815,230
• C. P816,567
• D. P817,239

830. A certain firm has the capacity to produce 650,000 units of product per year. At present, it is operating at 62% capacity. The firm’s annual income is P4,160,000.00. Annual fixed costs are P1,920,000.00 and the variable costs are equal to P3.56 per unit of product. What volume of sales does the firm breakeven?

• A. P3,354,680
• B. P3,534,880
• C. P3,155,690
• D. P3,254,680

831. A small shop in Bulacan fabricates threshers for palay producers in the locality. The shop can produce each thresher at a labor cost of P1,800.00. The cost of materials for each unit is P2,500.00. The variable costs amounts to P650.00 per unit while fixed charges incurred per annum totals P69,000.00. If the portable threshers are sold at P7,800.00 per unit, how many units must be produced and sold per annum to breakeven?

• A. 28
• B. 25
• C. 26
• D. 27

832. The direct labor cost and material cost of a certain product are P300 and P400 per unit, respectively. Fixed charges are P100,000 per month and other variable costs are P100 per unit. If the product is sold at P1,200 per unit, how many units must be produced and sold to breakeven?

• A. 280
• B. 250
• C. 260
• D. 270

833. The following data for year 2000 are available for Cagayan Automotive Company which manufactures and sells a single automotive product line:

Unit selling price - P40.00

Unit variable cost - P20.00

Unit contribution margin - P20.00

Total fixed costs - P200,000.00

What is the breakeven point in units for the current year?

• A. 10,000
• B. 10,100
• C. 10,050
• D. 10,200

834. The cost of producing a small transistor radio set consists of P230.00 for labor and P370.00 for material. The fixed charges is operating the plant is P1,000,000.00 per month. The variable cost is P10.00 per set. The radio set can be sold for P750.00 each. Determine how many sets must be produced per month to breakeven.

• A. 7,123
• B. 7,133
• C. 7,143
• D. 7,153

835. An item which can be sold for P63.00 per unit wholesale is being produced with the following cost data:

Labor cost - P10.00 per unit

Material cost - P15.00 per unit

Fixed charges - P10,000.00

Variable cost - P8.00 per unit

What is the breakeven point sales volume if one out of every 10 units produced is defective and is rejected with only full recovery on materials?

• A. P25,011
• B. P25,111
• C. P25,121
• D. P25,132

836. A method of depreciation whereby the amount to recover is spread uniformly over the estimated life of the asset in terms of the periods or units of output.

• A. Straight line method
• B. Sinking fund method
• C. Declining balance method
• D. SYD method

837. Which of the following depreciation methods cannot have a salvage value of zero?

• A. Declining balance method
• B. Sinking fund method
• C. Straight line method
• D. SYD method

838. A method of depreciation where a fixed sum of money is regularly deposited at compound interest in a real or imaginary fund in order to accumulate an amount equal to the total depreciation of an asset at the end of the asset’s estimated life.

• A. Straight line method
• B. Sinking fund method
• C. Declining balance method
• D. SYD method

839. The function of interest rate and time that determines the cumulative amount of a sinking fund resulting from specific periodic deposits.

• A. Sinking fund factor
• B. Present worth factor
• C. Capacity factor
• D. Demand factor

840. The first cost of any property includes:

• A. The original purchase price and freight and transportation charges
• B. Installation expenses
• C. Initial taxes and permits fee
• D. All of the above

841. In SYD method, the sum of years digit is calculated using which formula with n = number of useful years of the equipment.

• A. n(n – 1)/2
• B. n(n + 1)/2
• C. n(n+1)
• D. n(n-1)

842. Capitalized cost of any property is equal to the:

• A. Annual cost
• B. First cost + Interest of the first cost
• C. First cost + Cost of perpetual maintenance
• D. First cost + Salvage value

843. The lessening of the value of an asset due to the decrease in the quantity available (referring to the natural resources, coal, oil, etc).

• A. Depreciation
• B. Depletion
• C. Inflation
• D. Incremental cost

844. Is the simplest form of business organization.

• A. Sole proprietorship
• B. Partnership
• C. Enterprise
• D. Corporation

845. An association of two or more persons for a purpose of engaging in a profitable business.

• A. Sole proprietorship
• B. Enterprise
• C. Partnership
• D. Corporation

846. A distinct legal entity which can practically transact any business transaction which a real person could do.

• A. Sole proprietorship
• B. Enterprise
• C. Partnership
• D. Corporation

• A. Sole proprietorship
• B. Partnership
• C. Corporation
• D. Enterprise

848. Which is NOT a type of business organization?

• A. Sole proprietorship
• B. Corporation
• C. Enterprise
• D. Partnership

849. What is the minimum number of incorporators in order that a corporation be organized?

• A. 3
• B. 5
• C. 10
• D. 7

850. In case of bankruptcy of a partnership,

• A. The partners are not liable for the liabilities of the partnership
• B. The partnership assets (excluding the partners’ personal assets) only will be used to pay the liabilities.
• C. The partners’ personal assets are attached to the debt of the partnership
• D. The partners may sell stock to generate additional capital.

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