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EEC - MEC - EECA 2013 QP

SRM EASWARI ENGINEERING COLLEGE, RAMAPURAM DEPARTMENT OF MECHANICAL ENGINEERING Question Bank Su ! Co"e#Na$e% MG &'() * En+inee,in+ E-ono$i-s an" Cost Ana./sis 0ea,#Se$% 'TH #1III UNIT I Pa,t 2 A )! W3at is En+inee,in+ E-ono$i-s4 Engineering economics is a science, which deals with the application of economic theory in Engineering Practices !t is the st"dy of allocation of reso"rces a#aila$le to a firm among its acti#ities &! State t3e La5 o6 su77./! %he law of s"pply sates that &"antity s"pplied is positi#ely related to price 8! W3at "o /ou $ean / e.asti-it/ o6 su77./4 Elasticity of s"pply is the degree of responsi#eness of change in s"pply to change in price of sellers '! State t3e La5 o6 De$an"! According to Marshell, '%he amo"nt demanded increases with a fall in price and diminishes with a rise in price( (! W3at is -a..e" E-ono$i- E66i-ien-/4 !t is the ratio of prod"ct per ser#ice worth to the inp"t reso"rce cost Prod"ct) *er#ice worth Economic Efficiency+ !np"t ,eso"rce Cost 9! W3at a,e t3e e.e$ents o6 Cost4 %he elements of cost are fi-ed costs and .aria$le cost :! W3at is -a..e" $a,+ina. -ost4 Marginal Cost is the change in total cost as a conse&"ence of adding one more "nit !ncrease in %otal Cost Marginal Cost+ !ncrease in /"tp"t ;! W3at is -a..e" O77o,tunit/ Cost4 /pport"nity costs are the costs of displaced alternati#es 1

EEC - MEC - EECA 2013 QP

<! W3at "o /ou $ean / sunk -ost4 *"n0 cost is one which is not affected $y a change in the le#el or nat"re of $"siness acti#ity E- 1epreciation )=! W3at "o /ou $ean / $a,+in o6 sa6et/4 Margin of safety is the distance $etween the $rea0 e#en point and the o"tp"t $eing prod"ced ))! W3at is -a..e" ,eake>en 7oint4 !t is the intersection of the total cost line and the income line )&! W3at is 7,o6it >o.u$e ,atio4 Profit #ol"me ratio meas"res the profita$ility in relation to sales Pa,t 2 B 1 2 3 3 *tate and e-plain types of demand E-plain the concept of 2rea0 E#en Analysis E-plain the steps in#ol#ed in Process Planning A firm has a fi-ed cost of ,s 4500, *elling Price per "nit is ,s 5 and .aria$le cost per "nit is ,s 3 1etermine $rea0 e#en point in terms of #ol"me and also sales #al"e Calc"late the margin of safety considering that the act"al prod"ction is 6500 "nits %he following fig"res relate to a small man"fact"ring company7 *ales 8,s9 7 600000 .aria$le 8,s97 350000 :i-ed Cost8,s97 50000 Calc"late7 19 2EP 29 P). ,atio

EEC - MEC - EECA 2013 QP

UNIT II PART 2 A )! W3at "o /ou $ean / 1a.ue Ana./sis4 .al"e Analysis is the systematic identification and elimination of "nnecessary, "nessential costs &! List out t3e t/7es o6 1a.ue! Esteem #al"e, "se #al"e, Cost #al"e and E-change #al"e 8! W3at is -a..e" Estee$ 1a.ue4 %he feat"res or &"alities which ma0es the ownership of the prod"ct desira$le or which increases the sales appeal '! State an/ t5o ene6its o6 1a.ue Ana./sis! !t de#elops logical and analytical approach to sol#e pro$lems !t promotes creati#ity, &"ality awareness, positi#e attit"de amongst the employee (! W3at is -a..e" e66e-ti>e inte,est ,ate4 %he e&"i#alent interest rate for any period other than a year is called effecti#e interest rate Effecti#e interest rate + 81;i)C9c-1 9! W3at is sin+.e 7a/$ent 7,esent 5o,t3 6a-to,4 *ingle f"t"re s"m that will $e recei#ed after n periods at an interest rate of i compo"nded at the end of e#ery interest period : P+ 81;i9n where, :- :"t"re worth, P-Present worth, i- interest rate :! W3at is -a..e" e?ua. 7a/$ent se,ies sinkin+ 6un"4 %he e&"i#alent amo"nt that sho"ld $e deposited at the end of e#ery interest periods to reali<e the f"t"re s"m at the end of nth period at the interest rate of i ;! De6ine Uni6o,$ se,ies Annua. e?ui>a.ent a$ount! %he ann"al e&"i#alent amo"nt of a series with an amo"nt A1 at the end of the first year and with an e&"al increment 8=9 at the end of each following n-1 years with an interest rate of ! compo"nded ann"ally

EEC - MEC - EECA 2013 QP

PART 2 B A person wishes to ha#e a f"t"re s"m of ,s 3,00,000 for his son>s ed"cation after 15 years from now ?hat is the single payment that he sho"ld deposit now so that he gets the desired amo"nt after 15 years@ %he $an0 gi#es 15A interest rate compo"nded ann"ally Pradeepa is planning for his retied life *he plans to in#est an e&"al s"m of ,s 30,000 at the end of e#ery year for the ne-t 30 years starting from the end of ne-t year 2an0 gi#es 20A interest rate :ind the mat"rity amo"nt of her acco"nt after 30 years A company has to replace a present facility after 20 years at an o"tlay of ,s B,00,000 !t plans to deposit an e&"al amo"nt at the end of e#ery year for the ne-t 15 years at an interest rate of 20A :ind the e&"i#alent amo"nt that m"st $e deposited at the end of e#ery year for the ne-t year A $an0 gi#es a loan to a company to p"rchase e&"ipment ,s 20,00,000 at an interest rate of 1BA ann"ally %his amo"nt sho"ld $e repaid in 15 yearly e&"al installments :ind the installment amo"nt that the company has to pay to the $an0 A person is planning for his retired life Ce wo"ld li0e to deposit ,s 4000 at the end of first year and there after he wishes to deposit the amo"nt with an ann"al decrease of ,s 500 for the ne-t 12 years with an interest rate of 15A :ind the total amo"nt at the end of 20th year of a$o#e series

EEC - MEC - EECA 2013 QP

UNIT III PART 2 A )! W3at "o /ou $ean / 7,esent 5o,t3 $et3o"4 Cash flow of each alternati#e will $e red"ced to time <ero $y ass"ming an interest rate i %hen the $est alternati#e will $e selected $y comparing the present worth amo"nts of the alternati#es, depending on the type of decisions &! W3at s -a..e" 6utu,e 5o,t3 $et3o"4 %he f"t"re worth of #ario"s alternati#es will $e comp"ted and then the alternati#e with the ma-im"m f"t"re worth of net re#en"e or the minim"m f"t"re worth of net cost will $e selected 8! W3at is -a..e" ,ate o6 ,etu,n $et3o"4 %he rate of ret"rn of a cash flow pattern is the interest rate at which the present worth of that cash flow pattern decreases to <ero %he alternati#e with highest rate of ret"rn is chosen as the $est alternati#e '! De6ine annua. e?ui>a.ent $et3o"4 %he ann"al e&"i#alent cost or re#en"e of each alternati#e is fo"nd, and then the alternati#e with ma-im"m ann"al e&"i#alent re#en"e or minim"m ann"al e&"i#alent cost will $e chosen as the $est alternati#e (! State ,e>enue "o$inate" -as3 6.o54 %he profit, re#en"e, sal#age #al"e 8all in flow to an organi<ation9 will $e assigned positi#e sign %he costs 8o"tflows9 will $e assigned with negati#e sign 9! State Cost "o$inate" -as3 6.o54 %he costs 8o"tflows9 will $e assigned with positi#e sign %he profit, re#en"e, sal#age #al"e 8all in flow to an organi<ation9 will $e assigned negati#e sign PART 2 B An constr"ction company has two $ids for an ele#ator to $e installed in a new $"ilding %he details of the $ids for the ele#ators are as follows7 Engineer>s Estimates !nitial Cost *er#ice Ann"al /perations 2id 8,s 9 Dife 8Eears9 Maintenance Cost ="r" Ele#ator !nc F,50,000 15 25,000 Pra0ash Ele#ator !nc 4,30,000 15 30,000 1

1etermine which $id sho"ld $e accepted, $ased on present worth method of comparison ass"ming 25A interest rate, compo"nded ann"ally

EEC - MEC - EECA 2013 QP

A finance company ad#ertises two in#estment plans !n plan A, the company pays ,s 20,000 after 10 years for e#ery ,s 1000 in#ested now in plan 2, for e#ery ,s 1000 in#ested, the company pays ,s 5,000 at end of 5 th year and ,s 5,000 at end of 10th year-select the $est in#estment plan form the in#estor>s point of #iew at i + 13A compo"nded ann"ally

3 Consider the following two m"t"ally e-cl"si#e alternati#es Alternati#es End of Eear A 8,s9 - 30,00,00025,00,000 25,00,000 25,00,000 2 8,s9 50,00,000 16,00,000 16,00,000 16,00,000 At ip 1BA select $ase alternati#e $ased on f"t"re worth method of comparison

25,00,000 16,00,000

A company is planning to p"rchase on ad#ance machine "nder %hree original man"fact"rers ha#e responded to its tendes whose partic"lars are ta$"lated as7 1own Eearly E&"al G"m$er of Man"fact"res Payment 8,s 9 !nstallment 8,s 9 !nstallments 1 15,00,000 13,00,000 10 2 13,00,000 12,00,000 10 3 15,00,000 12,50,000 10 1etermine the $est alternati#e $ase don ann"al e&"i#alent method $y ass"ming i + 1BA A company m"st decide whether to $"y machine H or E Machine H !nitial cost 8,s 9 3,00,000 Isef"l life 8Eear9 5 *al#age #al"e at end of m)c life 2,00,000 Ann"al maintenance 8,s 9 35,000 At 15A interest rate, which machines sho"ld $e p"rchased@ 5 Machine E F,00,000 5 20,00,000 0

EEC - MEC - EECA 2013 QP

UNIT I1 PART 2 A )! List out t3e t/7es o6 $aintenan-e! Maintenance may $e classified as 8i9 Correcti#e or $rea0down maintenance 8ii9 *ched"led maintenance 8iii9 Pre#enti#e maintenance and 8i#9 Predicti#e maintenance &! State t3e "isa">anta+es o6 ,eak"o5n $aintenan-e! 1 !ncreased chances of accidents 2 ,ed"ction of o"tp"t 3 1eterioration of plant 3 1irect loss of profit 8! List out t3e o @e-ti>es o6 P,e>enti>e Maintenan-e! 1 %o minimi<e the possi$ility of "nanticipated $rea0down of machinery 2 %o maintain the optim"m prod"cti#e efficiency 3 %o red"ce the wor0 content of maintenance Jo$s 3 %o achie#e ma-im"m prod"ction at minim"m repair cost '! W3at "o /ou $ean / o>e,3au.4 A comprehensi#e e-amination and restoration of a facility to an accepta$le standard (! W3at is -a..e" a>ai.a i.it/4 Period for which a facility is in "sa$le state 9! State t3e ,easons 6o, ,e7.a-e$ent! 8a9 1eterioration 8$9 /$solescence 8c9 !nade&"acy 8d9 ?or0ing conditions :! W3at is -a..e" e-ono$i- .i6e4 %he point where the total cost 8capital reco#ery cost and maintenance cost9 is minim"m is called economic life of a machine ;! W3at is -a..e" -3a..en+e, an" "e6en"e,4 !f an e-isting e&"ipment is considered for replacement with the new e&"ipment , then the e-isting e&"ipment is 0nown as the defender and the new e&"ipment is 0nown as challenger

EEC - MEC - EECA 2013 QP

PART 2 B 1 %wo years ago, a CGC lathe was p"rchased at a cost of ,s 2,50,000 to $e "sef"l for eight years !ts sal#age #al"e at the end of its life is ,s 25,000 %he ann"al maintenance cost is ,s 25,000 %he mar0et #al"e of the present machine is ,s 1,50,000 Gow, a new CGC lathe to cater to the needed of the present lathe is a#aila$le at ,s 2,00,000 to $e "sef"l for si- years !ts ann"al maintenance cost is ,s 13,000 %he sal#age #al"e of the present lathe with the new lathe A petrol engine was installed 10 years ago at a cost of ,s 65,000 !t has a present reali<a$le mar0et #al"e of ,s 25,000 !f 0ept, it can $e e-pected to last fi#e years more, with operating and maintenance cost of ,s 15,000 per year and to ha#e a sal#age #al"e of ,s 10,000 at the end of the fifth year %his engine can $e replaces with an impro#ed #ersion costing ,s 40,000 which ahs an e-pected life of 20 year %his impro#ed #ersion will ha#e an estimated ann"al operating and maintenance cost of ,s 10,000 and "ltimate sal#age #al"e of ,s 15,000 Ising an interest tare of 15A, ma0e an ann"al e&"i#alent cost analysis to determine whether to 0eep or replace the old engine

%he following ta$le gi#es the operation cost, maintenance cost and sal#age #al#e at end of e#ery year of M)C whose p"rchase #al"e is ,s 20,000 End of year /perati#e Cost at Maintance Cost *al#age .al"e at End of 8n9 End of Eear at End of Eear Eear 1 3,000 300 5,000 2 3,000 500 3,000 3 F,000 F00 3,000 3 6,000 600 2,000 5 5,000 B00 0 !nterest rate + 15A %he following data are a#aila$le for e-isting e&"ipment and for proposed e&"ipment to replace the e-isting one :ind whether the concerns wo"ld go for replacement or not :actors E-isting E&"ipment Proposed /ne a Cost ,s 1500 ,s 15000 $ /perating E-penses ,s 5000 ,s 3BB54 c *crap .al"e ,s 300 ,s B0 d !nterest 10A 10A e Dife %ime 2 Eears 5 Eears =i#en $elow is the data for two e&"ipments :ind which alternati#e yo" will choose E&"ipment ! E&"ipment 2 !nitial Cost 8P9 ,s 10,000 ,s 15,000 Ann"al /perating Cost ,s 5,000 ,s 1,000 Dife of E&"ipment 10 Eears0 10 Eears B 5 3

EEC - MEC - EECA 2013 QP

*al#age .al"e 8D9 !nterest ,ate 8i9 5A

,s 2,000

,s 3,000

EEC - MEC - EECA 2013 QP

UNIT 1 PART 2 A )! De6ine "e7,e-iation! 1epreciation may $e defined as the method of spreading the cost of a fi-ed asset o#er the life or e-pected years of "se of an asset &! List out t3e "e7,e-iation "ue to 73/si-a. -on"itions! 8i9 ?ear and tear d"e to operating "se 8ii9 Action of elements li0e r"st heat and decay 8iii9 1isasters li0e accidents, earth&"a0es, 8i#9 Poor maintenance 8! List out t3e $et3o" o6 -a.-u.atin+ "e7,e-iation! 8i9 *traight-line method 8ii9 1iminishing $alance method 8iii9 %he s"m of years digit method 8i#9 *in0ing f"nd method 8#9 1epreciation $y ser#ices '! De6ine in6.ation! !nflation may $e defined as a s"stained rise in the general price le#el PART B 1 %he state go#ernment of =oa is planning to constr"ct a $ridge across the ri#er %he estimated initial in#estment for constr"cting the $ridge is ,s 35,00,000 %he estimated life of the $ridge is 15 years %he ann"al operation and maintenance cost is ,s 1,50,000 %he #al"e of f"el sa#ings d"e to the constr"ction of the $ridge is ,s 5, 00,000 in the first year and it increases $y 50,000 e#ery year thereafter till the end of the life of the $ridge Chec0 whether the proJect is J"stified $ased on 2C ration $y ass"ming an interest rate of 12A compo"nded ann"ally An engine lathe was p"rchased for ,s 20,000 its "sef"l life was 5 years and sal#age #al"e of ,s 10,000 Ising the diminishing $alance method, calc"late the depreciation ratio An engine lathe was p"rchased for ,s 15,000 its "sef"l life was10 years and sal#age of ,s 5,000 Ising diminishing $alance method, estimate depreciation f"nd at end of two years Estimate rate of depreciation from following data "sing sin0ing f"nd method Cost of machine ,s 15,000 10

EEC - MEC - EECA 2013 QP

*wap .al"e ,s 5,000 !nterest at rate of 4A compo"nd Isef"l life of machine 10 Eears 5 Estimate the rate of depreciati#e "sing sin0ing f"nd method Cost of Machine ,s 15,000 *crap .al"e ,s 11,000 !nterest at rate of BA compo"nd Dife of Machine 5 Eears

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