# MCQs in Engineering Economics Part XXVI

Compiled MCQs in Engineering Economics Part 26 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 26 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 26: MCQs from Number 1251 – 1300                 Answer key: PART XXVI

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

Choose the letter of the best answer in each questions.

1251. A businessman borrowed P300,000 with interest at the rate of 6% compounded semi-annually. He agrees to discharge his obligation by paying a series of 8 equal semi-annual payments, the first being due at the end of 5.5 years. Find the semi-annual payment.

• a. P69,475.53
• b. P57,434.78
• c. P73.083.59
• d. P40,922.40

1252. A man borrowed P300,000 from a lending institution which will be paid after 10 years at an interest rate of 12% compounded annually. How much should he deposit to a bank monthly in order to discharge his debt 10 years hence?

• a. P2,798.52
• b. P3,952.50
• c. P4,672.31
• d. P5,093.06

1253. What is the accumulated amount of the five year annuity paying P6000 at the end of each year, with interest at 15% compounded annually?

• a. P40,454.29
• b. P41,114.29
• c. P41,454.29
• d. P40,544.29

1254. A man owes P12,000 today and agrees to discharge the debt by equal payments at the beginning of each 3 months for 8 years, where this payments include all interest at 8% payable quarterly. Find the quarterly payment.

• a. P501.30
• b. P602.40
• c. P498.20
• d. P701.60

1255. A man will deposit P200 with a savings and loan association at the beginning of 3 months for 9 years. If the association pays interest at the rate of 5.5%quarterly, find the sum to his credit just after the last deposit.

• a. P9236
• b. P9363
• c. P9563
• d. P9684

1256. At what interest rate payable quarterly will payments of P500 at the beginning of each 3 months for 7 years discharge a debt of P12500 due immediately?

• a. 3.44%
• b. 4.33%
• c. 5.44%
• d. 6.33%

1257. A P1,000,000 issue of 3% 15 years bonds was sold at 95%. If miscellaneous initial expenses of the financing were P20,000 and yearly expenses of P2,000 is incurred, what is the true cost the company is paying for the money it borrowed?

• a. 2.6%
• b. 4.2%
• c. 4.0%
• d. 3.8%

1258. A man was offered a Land Bank certificate with a face value of P100,000 which is baring interest of 8% per year payable semi-annually and due in 6 years. If he wants to earn 6% semi-annually, how much must he pay the certificate?

• a. P96,041.92
• b. P90,061.49
• c. P90,614.92
• d. P99,814.92

1259. The National Irrigation Administration undertakes the construction of an irrigation project in the province of oriental Mindoro which will cover an area of 10,000 hectares and estimated cost P10,000,000 which was borrowed from the World Bank at the start of the construction. The construction will last 30 years with no salvage value. Bonds will be paid at 4% per annum compounded annually for 30 years. The construction of project will take 4 years. Insurance operation and maintenance of the system will cost P120,00 per year. Interest on sinking fund is 6%. How much should each hectare be charged?

• a. P64.65
• b. P66.56
• c. P60.66
• d. P45.65

1260. A company issued 50 bonds of P1,000 face value each redeemable at par at the end of 15 years to accumulate the funds required fro redemption. The firm established a sinking fund consisting of annual deposits, the interest rate of the fund being 4%. What was the principal in the fund at the end of 12th year?

• a. P35,983
• b. P38,378
• c. P41,453
• d. P37,519

1261. An oil well which could produce a net income of P15,000,000 per year for 25 years is being considered to be purchased by a group of businessman. If the return on investment is targeted to be 20% out of the net income and the sinking fund at 18% interest is to be established at recover of investment, how much must be paid to the oil well?

• a. P70,215,276.17
• b. P73,297,198.28
• c. P73,921,184.58
• d. P75,973,209.26

1262. An investor pays P1,100,000 for a mine which will yield a net income of P200,000 at the end of each year for 10 years and then will become useless. He accumulated a replacement fund to recover his capital by annual investments at 4.5%. At what rate(%) does he receive interest on his investment at the end of each year?

• a. 10.04%
• b. 8.5%
• c. 11.5%
• d. 14.5%

1263. A certain marble mine property has an estimated life of 30 years at a projected annual output of 3000 cubic meters of marble blocks. Estimated management cost per year is placed at P1,500,000 and operating cost of the quarry and processing plant is P8000 per cubic meter. The finished products, tiles and slabs, can be sold for P12,000 per cubic meter if exported. Determine the present valuation of the mineral property if the sinking fund rate of interest is 15% and the annual dividend rate is to be 12%.

• a. P85,444,313.27
• b. P85,554,371.18
• c. P85,854,317.13
• d. P85,345,365.28

1264. The annual dividend from a mine will be P75,000 until the ore is exhausted at the end of 30 days, and the mine becomes useless. Find the price of the mine to yield the investor 6.5%, if he accumulated a replacement fund to restore his capital by annual investment at 5%.

• a. P936,897.63
• b. P836,286.39
• c. P982,286.29
• d. P735,385.53

1265. The privileges of a patent will last for 20 more years and the royalty from it will be P60,000 at the end of each year during that time. Find the value of his patent rights to an investor who desires interest at 8% on his investment and will accumulate a capital replacement fund at 5%.

• a. P594,297.20
• b. P544,254.30
• c. P405,384.28
• d. P629,289.40

1266. The annual income from the mine is P100,000 and the life of the mine is 20 years. Find the price that an investor is willing to pay for the mine if he considers that money is worth 5% and if he is to accumulate a sinking fund at 6% in order to replace the capital he invested.

• a. P1,295,595.57
• b. P1,995,959.97
• c. P1,529,847.29
• d. P1,159,287.92

1267. An untreated electric wooden pole that will last 10 years under a certain soil conditions costs P1200. 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% at first cost.

• a. P1,559.50
• b. P1995.28
• c. P1,593.20
• d. P1,959.30

1268. A company must relocate one of its factories in three years. Equipment for the loading dock is being considered for purchase. The original cost is P20,000,000, the salvage value of the equipment after three years is P8,000. The company’s rate of return on money is 10%. Determine the capital recovery rate per year.

• a. P5115
• b. P4946
• c. P5625
• d. P4805

1269. A new engine will cost P12,000 with an estimated life of 15 years and a salvage value of P800 and guaranteed to have an operating cost of P3500 per year. The new engine is considered as a replacement of the old one. The old engine had a total annual cost of P5,200 to operate. Determine the rate of return of the new investment using 6% sinking fund to recover depreciation, if the old engine could be sold now for P2000.

• a. 12.19%
• b. 14.29%
• c. 10.47%
• d. 15.92%

1270. A corporation uses a type of motor truck which costs P5000with a life of 2 years and final salvage value of P800. How much could the corporation afford to pay for another type of truck of the same purpose for a life of 3 years with a final salvage value of P1000? Money is worth 4%

• a. P8450.66
• b. P7164.37
• c. P6398.24
• d. P9034.56

1271. A granite quarry purchased of 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. P551,544
• b. P552,550
• c. P550,540
• d. P553,420

1272. A machine has a first cost of P800,000 and a salvage value of P50,000 at the end of its life after 10 years. The annual saving for the use of the machine amount s to P124,900.97. If the annual maintenance of the machine is P4000 and the sinking fund to recover depreciation earns 6%, compute for the rate of return of investment.

• a. 8%
• b. 7%
• c. 6%
• d. 9%

1273. The first cost of a certain equipment is P324,000 and a salvage value of P50,000 at the end of its life of 4 years. If money is worth 6% compounded annually, find the capitalized cost.

• a. P1,367,901.15
• b. P1,427,846.17
• c. P936,431.16
• d. P843,916.27

1274. A multi million project can purchase heavy duty trucks for P600,000 each. It is estimated to have a salvage value of P60000 at the end of its life which is 10 years. Maintenance and operating cost including the driver is estimated to cost an average of P3000 per year. The contractor however can hire a similar truck and its operator for P420 per day. If money is worth 12%, how many days per year must the service of the truck be required to justify the buying of the trucks. Use annual cost method.

• a. 243 days
• b. 225 days
• c. 252 days
• d. 255 days

1275. Each removal from a ditch in city streets is accomplished by a machine loading into trucks. This machine will cost P20,000 with labor, fuel, oil, and maintenance amounting to P5000 per year. Life of the machine is estimated to be 5 years and no salvage value. The contractor however can hire a similar machine and its operator at P340 per day. How many days per year must the services of the machine be required to justify the purchase of their new machine of the money is worth 10%. Use annual cost method.

• a. 428 days
• b. 248 days
• c. 284 days
• d. 482 days

1276. A contractor can purchase a heavy-duty truck for P500,000. Its estimated life is 8 years and estimated salvage value of P6000. Maintenance is estimated to be P2500 annually including the cost of driver and fuel maintenance. The contractor can hire a similar unit and driver for P750 a day. If interest is taken at 8%, how many days per year must be services of a dump truck be required to justify the purchase of a truck? Use annual cost method.

• a. 112 days
• b. 121days
• c. 132 days
• d. 211 days

1277. It cost P50,000 at the end of each year to maintain a section of Kennon road. If money is worth 10%, how much would it pay to spend immediately to reduce the annual cost to P10,000?

• a. P410,000
• b. P554,000
• c. P400,000
• d. P453,000

1278. If money is worth 12% compounded quarterly, what is the present value of the perpetuity of P1,000 payable monthly?

• a. P453,876.80
• b. P100,976.23
• c. P342,993.70
• d. P100,993.78

1279. Find the present value, in peso, of a perpetuity of P15,000 payable semi-annually if money is worth 8% compounded quarterly.

• a. P372,537
• b. P374,977
• c. P373,767
• d. P371,287

1280. A businessman invested in a medium scale business which cost him P47,000. The net annual return estimated is P14,000 for each of the next 8 years. Compute the benefit cost ratio if the annual rate of interest is 18%.

• a. 1.21
• b. 1.76
• c. 2.23
• d. 1.11

1281. A project costs P100,000. The benefit at the end of each year for a period of 5 years is equal to P40,000. Assuming money is worth 8% with no salvage value, compute the benefit cost ratio.

• a. 1.125
• b. 2.124
• c. 1.875
• d. 1.597

1282. Compute the benefit cost ratio of the following project:

Project cost = P80,000

Gross income = P25,000 per year

Opening Cost = P6,000 per year

Salvage Value = 0

Life of Project = 10 years

Rate of Interest = 12%

• a. 1.34
• b. 1.78
• c. 2.23
• d. 1.11

1283. A local factory assembling calculators produces 100 units per month and sells them at P1,800 each. Dividends are 8% on the 8000 shares with par value of P250 each. The fixed operating cost per month is P25,000. Other costs are P1,000 per unit. Determine the break even point. If only 200 units were produced per month, determine the profit.

• a. 50 ; P112,656.67
• b. 45 ; P122,676.88
• c. 48 ; P121,666.67
• d. 48 ; P212,666.67

1284. General Electric Company, which manufactures electric motor, has a capacity of producing 150 motors a month. The variable costs are P4,000 per month, the average selling price of the motor is P750 per motor. Fixed costs of the company amounts to P78,000 per month which includes all taxes. Determine the number of motors to be produced per month to break even and the sales volume in pesos at this point.

• a. 105 units
• b. 120 units
• c. 110 units
• d. 115 units

1285. A plywood manufacturer produces a piece of plywood at a labor cost of P0.50 and material at P3.00. The fixed charges on business are P50,000 a month and the variable cost is P0.50 per piece. If one plywood sells for P6.00 each, how many pieces must be produced each month for the manufacturer to break even?

• a.  27,000
• b. 25,000
• c. 24,000
• d. 22,000

1286. The profit on a product selling for P8.20 is 10% of the selling price. What percentage increase in production cost will reduce the profit by 60%?

• a. 6.67%
• b. 6.76%
• c. 7.66%
• d. 7.66%

1287. A local company assembling stereo radio cassette produces 300 units per month at a cost of P800 per unit. Each stereo radio cassette sells for P1,200. If the firm makes a profit of 10% on its 10,000 shares with a par value of P200 per share, and the total fixed cost is P20,000 per month. What is the break even point and how much is the loss or profit if only 100 units are produced in a given month?

• a. 90 ; P3,444.33
• b. 91 ; P4,333.44
• c. 92 ; P3,333.33
• d. 93 ; P4,444.33

1288. A certain operation is now performed by hand, the labor cost per unit is P0.54 and the annual fixed charge for tool used is estimated at P100 per year. A machine that is being considered for this job will cost P2,400, have a salvage value of P100 at any time and a fixed annual cost of P200. With it, labor cost is P0.22 per unit. For what number of units of product per year at zero interest and life of 6 years for the machine will the annual cost of the two methods break even?

• a. 1510 units
• b. 1050 units
• c. 1150 units
• d. 1551 units

1289. A shoe manufacturer produces a pair of shoes at a labor cost of P9.00 a pair and a material cost of P8.00 a pair. The fixed charges on the business is P90,000 a month and the variable cost is P4.00 a pair. If the shoes sells at P30 a pair, how many pairs must be produced each month for the manufacturer to break even?

• a. 10,000
• b. 12,000
• c. 11,000
• d. 13,000

1290. An item which can be sold for P36.00 per unit wholesale is being produced with the following cost data; labor cost, P10 per unit; material cost, P15.00 per unit; fixed charges, P10,000; variable cost, P8.00 per unit. What is the break even point sales volume and the break even sales volume if one out of every ten units produced is defective and is rejected with only full recovery on materials?

• a. 322.33 ; 377
• b. 345.33 ; 379
• c. 353.33 ; 333
• d. 333.33 ; 397

1291. 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. Annual fixed cost is P1,920,000 and the variable cost is equal to P3.56 per unit of product. What is the firm’s annual profit or loss and what volume of sales does the firm break even?

• a. P805,320 ; P3,354,680
• b. P850,330 ; P3,543,683
• c. P803,550 ; P3,276,398
• d. P800,286 ; P3,186,586

1292. 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 break even?

• a. 200 units
• b. 250 units
• c. 300 units
• d. 260 units

1293. XYZ Corporation manufacturers book cases that it sells for P65.00 each. It costs XYZ 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. 2334
• b. 539
• c. 750
• d. 2233

1294. A telephone switchboard 100 pair cable can be made up with either enameled wire or tinned wire. There will be 400 soldered connections. The cost of soldering a connection on the enameled wire will be P1.65, on the tinned wire, it will be P1.15. A 100 pair cable made up with enameled wire cost P0.55 per lineal foot and those made up to tinned wire cost P0.76 per lineal foot. Determine the length of cable run in feet so that the cost of each installation would be the same.

• a. 1121.06 ft
• b. 1001.25 ft
• c. 864.92 ft
• d. 952.38 ft

1295. A company which manufactures electric motors has a production capacity of 200 motors a month. The variable costs are P150 per motor. The average selling price of the motor is P275. Fixed costs of the company amounts to P20,000 per month which included taxes. The number of motors that must be sold each month to break even is closest to:

• a. 40
• b. 150
• c. 80
• d. 160

1296. Steel drums manufacturer incurs a yearly fixed operating cost of P200,000. Each drum manufactured cost P160 to produce and sells for P200. What is the manufacturer’s break even sales volume in drum per year? If they could manufacture 7,000 drums per year, determine the amount of profit or loss.

• a. 1250 ; P70,000
• b. 2500 ; P60,000
• c. 5,000 ; P80,000
• d. 1,000 ; P75,000

1297. A new Civil Engineer produces a certain construction ,material at a labor cost of P16.20 per piece, material cost of P38.50per piece and variable cost of P7.40 per piece. The fixed charges on the business is P100,000 a month. If he sells the finished product at P95.00 each, how many pieces must be manufactured each month to break even?

• a. 3040
• b. 3400
• c. 3004
• d. 4300

1298. A manufacturer produces certain items at a labor cost per unit of P315, material cost per unit of P100, variable cost of P3.00 each. If the item has a selling price of P995, how many units must be sold to break even if the monthly overhead is P461,600?

• a. 600
• b. 700
• c. 800
• d. 900

1299. A cement firm with production capacity of 130 tons per day (24 hrs) of clinker has its burning zone about 45 tons of magnesium chrome bricks being replaced periodically, depending on some operational factors and the life of the bricks. If locally produced bricks cost costing P30,000 per ton and have a life of 6 months, determine the more economical bricks and by how much?

• a. P6,057,000
• b. P6,750,000
• c. P6,505,000
• d. P6,075,000

1300. An equipment installation job in the completion stage can be completed in 40 days of 8 hour day work, with 40 men working. With the contract expiring in 30 days, the mechanical engineer contractor decided to add 10 men on the job, overtime not being permitted. If the liquidated damages is P2,000 per day of delay, and the men are paid P80 per day, how much money would he save if he will add workers?

• a. P15,000
• b. P15,500
• c. P16,500
• d. P16,000

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