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This document contains sample questions for an economics exam for engineers. It covers topics like working capital, sunk costs, current assets, value added tax, inflation, depreciation methods, break-even analysis, net present value, accounting equations, and more. There are multiple choice questions, short answer questions, and long answer questions testing understanding of key economic and accounting concepts.

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Sumon Dhara
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65 views4 pages

4336

This document contains sample questions for an economics exam for engineers. It covers topics like working capital, sunk costs, current assets, value added tax, inflation, depreciation methods, break-even analysis, net present value, accounting equations, and more. There are multiple choice questions, short answer questions, and long answer questions testing understanding of key economic and accounting concepts.

Uploaded by

Sumon Dhara
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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HU501 Economics for Engineers

GROUP A Multiple Choice Type Questions 1. Answer all the questions i) Working capital is equal to a) Current Assets Current Liabilities b) Fixed Assets Long term Liabilities c) Sundry Debaters - Sundry Creditors d) None of these ii) Sunk cost is the money spent as a result of a) Present decision b) Past decision c) Future decision d) All of these iii) Which of the following is a current asset? a) Investments b) Furniture c) Closing stock d) Debentures iv) Value added tax (VAT) is based on a) Percentage of firms profit b) On payroll c) At each stage of the supply chain d) On resource development v) Inflation is caused due to a) Excessive demand b) Increase in production cost c) Due to scarcity of goods d) All of these vi) The worthiness of an engineering project is analyzed by a) Gross domestic product b) Capital-output ratio c) Present worth analysis d) Return on capital employed vii) Depreciation is charged on the original cost of the asset in a) Straight-line method b) Reducing balance method c) Sinking-fund method d) Double declining method

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viii)

Stock turnover ratio is equal to

a) b) c)
d)
ix)

Interest current assets


P ratio V

cost of goods sold PBIT stock

Capitalised cost is equal to a) Sales cost of goods sold b) EUAW EUAC c) d)


Annual disbursement Interest rate Cost Uniform annual benefit

current liabilities Fixed Assets

GROUP B

(Answer any three of the following)

2. Define break-even point. Draw a break-even chart and explain its components. 3. A bank gives loan to a company to purchase an equipment which is worth of Rs. 5,00,000 at an interest rate of 18% compounded annually. This amount should be repaid in 25 yearly equal instalments. Find the instalment amount that the company has to pay to the bank. 4. A piece of land may be purchased for Rs. 610,000 to be strip-mined for the underlying coal. Annual net income will be Rs. 2,00,000 for 10 years. At the end of 10 years, the surface of the land will be restored as required by a national law on strip-mining. The reclamation will cost Rs 1.5 million more than the resale value of the land after it is restored. Using a 10% interest rate, determine whether the project is desirable. 5. What is accounting equation? From the following information calculate i) Gross Profit ratio ii) Stock Turnover ratio iii) Debtors Turnover ratio Sales Rs. 1,50,000 Cost of Goods Sold Rs. 1,20,000 Opening Stock Rs. 27,000 Debtors Rs. 14,000 Closing stock Rs. 33,000 Bills Receivable Rs. 6,000

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Short Answer Type Question

6. A company has purchased a bus for its offices for Rs. 10,00,000. The expected life of the bus is 8 years. The salvage value of the bus at the end of its life is Rs. 1,50,000. Find the following using the sinking fund method a) Depreciation at the end of third and fifth year. b) Book value at the end of second and sixth year. GROUP C Long Answer Type Question 7. a) What is inflation? What are the consequences of inflation? b) A proposal with an initial cost of $2000 is expected to produce net returns of $850 per year for 3 years. The minimum acceptable rate of return is 15% and rate of inflation is 5%. Analyse whether the project should be accepted or rejected by i) without considering inflation ii) considering inflation. 8. a) Define the following costs with examples i) Sunk cost ii) Opportunity cost iii) Life-cycle costs

b) Krishna Company Ltd. has the following details Fixed cost = Rs 40,00,000

Variable cost per unit = Rs 300 Selling price per unit = Rs 500 Find

a) Break-even sales quantity, b) Brean-even sales,

c) If the actual production quantity is 1,20,000 units, find i) Contribution, ii) Margin of safety.

9. Write short notes on i) Replacement Analysis ii) Joint Probability Distributions iii) Incremental Analysis

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10. a) Compute the taxable income for each of the three years, when a firm had the following results Year 1 Year 2 Year 3 Gross Income from 200 200 200 Sales Purchase of special -60 0 0 tooling (useful life 3 years) All other -140 -140 -140 expenditures 0 60 60 b) Explain the different types of property in the context of depreciation. 11. a) The cash flows for two alternatives are as follows Year A 0 -1000 1 +200 2 +200 3 +1200 4 +1200 5 +1200 B -2783 +1200 +1200 +1200 +1200 +1200

Using 15% interest rate which alternative should be selected based on future worth method.

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It is assumed that benefits occur throughout the year. Based on payback period, which alternative should be selected? b) Consider the following two mutually exclusive alternatives A B Cost Rs 4000 Rs 6000 Uniform Annual Benefit Rs 640 Rs 960 Useful Life (years) 20 20

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