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Unit Operations Economics

Unit Operations Economics b. interest


c. capital
d. annuity
1. ____ is the money returned to the owners of capital for use of their capital. 11. Common type of ____which involves payments, which occur at the end of each interest period
a. Interest a. Perpetuity
b. Cash b. Present worth of annuity
c. Loan c. capital
d. credit d. annuity
2. Any profit obtained through the uses of capital 12. Defined as the principal which would have to be invested at the present time at compound
a. Interest interest rate to yield a total
b. Cash a. Perpetuity
c. Loan b. Present worth of annuity
d. credit c. capital
3. In economic terminology, the amount of capital on which interest is paid is designated as the d. annuity
principal, and the rate of interest is defined as the amount of interest earned by a unit of 13. An annuity in which the first payment is due after a definite number of years.
principal in a unit of time a. Perpetuity
a. simple interest b. Present worth of annuity
b. compound interest c. deferred interest
c. nominal interest d. deferred annuity
d. interest on loan 14. It is an annuity in which the periodic payments continue indifferently.
4. When an interest period of less than 1 year is involved a. Perpetuity
a. simple interest b. Present worth of annuity
b. ordinary interest c. deferred interest
c. nominal interest d.deferredannuity
d .compound interest 15. Defined as the original cost of the equipment plus the present value of the renewable
5. This interest stipulates that interest is due regularly at the end of each interest period. perpetuity.
a. simple interest a. Perpetuity
b. ordinary interest b. Present worth of annuity
c. nominal interest c. deferred interest
d.compoundinterest d.capitalizedcost
6. In ______interest rate, other time units are employed butthe interest rate is still expressed on an 16. An ____design could be based on conditions giving the least cost per unit of time or the
annual basis. maximum profit per unit of production.
a. simple interest a. optimum economic
b. ordinary interest b. plant
c. nominal interest c. simple economic
d.compoundinterest d.plant economic
7. The concept of ______is that the cost or income due to interest flows regularly, and this is just 17. A determination of an “____condition” serves as a base point for a cost or design analyses, and
as reasonable an assumption for most cases as the concept of interest accumulating only at it can often be quantitized in specific mathematical form.
discrete intervals. a. optimum
a. continuous Interest b. plant design
b. Cash flow c. simple
c. Loan d.plant economic
d. credit 18. The ___has one distinct advantage over the analytical method.
8. The present worth of a future amount is the present ___which must be deposited at a given a. optimum
interest yield tom yield the desired amount at some future date. b. graphical
a. principal c. simple
b. Cash flow d.economical
c. capital 19. The point where total product cost equals total income represents the_____, and the optimum
d. credit production schedule must be at a production rate higher than that.
9. An ____is a series of equal payments occurring at equal time intervals. a. optimum
a. principal b. break-even point
b. interest c. annuity
c. capital d. balanced
d. annuity 20. The total product cost per unit of time may be divided into the two classifications of operating
10. The amount of an ___is the sum of all the payments plus interest if allowed to accumulate at a costs and ____costs.
definite rate of interest from the time of initial payment to the end of the term. a. optimum operating costs
a. principal b. Organization costs
Unit Operations Economics
c. annuity costs 28. The concept of this is based on converting an overall decision situation involving many
d. superproduction costs variables into a series of simpler individual problems with each of these involving a small
21. This depends on the rate of production and include expenses for direct labor, raw materials, number of total variables.
power, heat, supplies, and similar items which are function of the amount of material a. economics
produced. b. programming
a. operating costs c. linear programming
b. Organization costs d. dynamic programming
c. annuity costs 29. When quality constraints or restrictions on certain variables exist in an optimization situation, a
d. superproduction costs powerful analytical technique is the use of :
22. ______are due to expenses for directive personnel, physical equipment, and other services or a. Lagrange Multipliers
facilities which must be maintained irrespective of the amount of material produced. These b. Geometric Programming
are independent of the rate of production. c. steepest Ascent or Descent
a. operating costs d. dynamic programming
b. Organization costs 30. For the optimization situation in which two or more independent variables are involved,
c. annuity costs response surface can often be prepared to show the relationship among the variables one of
d. superproduction costs the early methods proposed for establishing optimum conditions from response surfaces is
23. Extra expenses due to increasing the rate of production are known as ____. known as the method:
a. operating costs a. Lagrange Multipliers
b. Organization costs b. Geometric Programming
c. annuity costs c. linear programming
d. superproduction costs d. steepest Ascent or Descent
24. In a true ___operation, no product is obtained until the unit is shut down for discharging. 31. A technique for optimization, based on the inequality relating the arithmetic mean to geometric
a. batch mean, with this method the basic idea is to start by finding the optimum way to distribute the
b. continuous total cost
c. semi-batch a. Lagrange Multipliers
d. semi-continuous b. Geometric Programming
25. In _____cyclic operations, product is delivered continuously while the unit is in operation, but c. linear programming
the rate of delivery decreases with time. d. steepest Ascent or Descent
a. batch 32. ____(CPM) and program evaluation and review technique) have received particular attention
b. continuous and have shown the desirability of applying mathematical and graphical analysis
c. semi-batch a. critical path method
d. semi-continuous b. critical planning method
26. _____cyclic operations are often encountered in the chemical industry, and the design c. careful planning and management
engineer should understand the methods for determining optimum cycle times in this type of d. none of the above
operation 33. The word ____is used as a general term for the measure of the amount of profit that can be
a. batch obtained from a given situation.
b. continuous a. profitability
c. semi-batch b. income
d. semi-continuous c. net income
27. It is a mathematical technique, for determining optimum conditions for allocation of resources d. sales
and operating capabilities to attain a definite objective. 34. It is the common denominator for all business activities before capital is invested to a project or
a. economics enterprise
b. programming a. profitability
c. linear programming b. income
d. dynamic programming c. net income
d. sales
35. ____on investments is ordinarily expressed on an annual percentage basis. The yearly profit
divided the by the total initial investment necessary represents the fractional return:
a. rate of return
b. interest income
c. profitability
d. annuity
36. ___is defined as the difference between income and expense.
a. profit
b. gross income
c. operating expenses
d. sales
Unit Operations Economics
37. This is a function of the quantity of goods and services produced and the selling price. a. a. double entry method
sales b. fixed percentage method
b. gross income c. sum-of-years digit method
c. operating expenses d. sinking fund method
d. profit 47. ___ is a science which deals with the attainment of the maximum fulfillment of society’s
38. The method of approach for a profitability evaluation is by ____, which takes into account the unlimited demands for goods and services.
time value of the money and is based on the amount of the investment that is unreturned at a. Political science
the end of each year during the estimated life of the project. b. Economics
a. marketing analysis c. Engineering Economy
b. gross income d. Social Science
c. discounted cash flow 48. It is the branch of economics which deals with the application of economics laws and theories
d. law of demand involving engineering and technical projects or equipments.
39. In the net present worth study, the procedure has involved the determination of an index or a. Political science
interest rate which discounts the annual ____to a zero present value when properly compared b. Economics
to the initial investment. c. Engineering Economy
a. marketing analysis d. Social Science
b. gross income 49. This refers to the products or services that are directly used by people to satisfy their wants.
c. cash flow a. Producer goods and services
d. selling price b. Consumer goods and services
40. The ____concept is useful for comparing alternatives which exist as possible investment c. Luxury Products
choices within a single overall project. d. Supply
a. marketing analysis 50. Those that are used to produce the goods and services for the consumer are called
b. sales inventory a. Producer goods and services
c. discounted cash flow b. Consumer goods and services
d. capitalized cost profitability c. Machineries and Technology
41. ____ is defined as the minimum length of time theoretically necessary to recover the original d. Supply
capital investment in the form of cash flow to the project based on total income minus all cost 51. This refers to the satisfaction or pleasure derived from the consumer goods and services.
except depreciation. a. Product Satisfaction
a. deadline b. Consumer’s contentment
b. due date c. Luxury Products
c. payout period d. Utility
d. maturity date 52. These are products that have an income-elasticity of demand greater than one.
42. The term ___ refers to a special type of alternative in which facilities are currently in existence a. Basic Commodities
and it may be desirable to replace these facilities with different ones. b. Consumer goods
a. reserves c. Luxury Products
b. replacement d.Supply
c. substitute 53. If the income elasticity of demand is greater than one, this means that
d. none of the above a. as income decreases, more income will be spent on the basic commodities
43. In the formula, P = F(1+I )-N , where I = interest rate per period and N the number of interest b. as income increases, more expenses will be made on the basic commodity products
periods is known as c. as income increases, more income will be spent on luxury items
a. sinking fund factor d. as income decreases, less will be spent on the basic commodity products
b. single payment present worth factor 54. It is the amount of goods and products that are available for sale by the suppliers
c. uniform series a. Producer goods and services
d. capital recovery factor b. Consumer goods and services
44. Which of the following relationships between compound interest factors is not correct? c. Machineries and Technology
a. Single payment compound amount factor and single payment present worth factor are d. Supply
reciprocals 55. The want or desire or need for a product using money to purchase it.
b. Capital recovery factor and uniform series present worth are reciprocals a. Supply
c. Capital recovery factor equals the sinking fund factor plus the interest rate b. Consumer goods and services
d. capital recovery factor and sinking fund factor are reciprocals c. Luxury Products
45. An “annuity” is defined as d. Demand
a. Earned interest due at the end of each interest period 56. The law of supply and demand, states that
b. Cost of producing a product or rendering a service a. “When free competition exists, the price of the product will be that value where supply is
c. Amount of interest earned by a unit principal in a unit of time equal to the demand”
d. A series of equal payments made at equal interval of time b. “When perfect competition exists, the price of the product will be that value where supply is
46. Which one of the following method is not a method of depreciating plant equipment for equal to the demand”
accounting and engineering economic analysis purposes?
Unit Operations Economics
c. “When free competition exists, the price of the product will be that value where supply is 65. It is the amount of money or payment for the use of a borrowed money or capital
greater to the demand” a. Annuity
d. “When perfect competition exists, the price of the product will be that value where supply is b. Interest
greater to the demand” c. Simple Interest
57. This is a form of market structure where the number of suppliers is used to determine the type d. Simple Annuity
of market. 66. This is defined as the basic annual rate of interest
a. Market Structures a. effective rate of annuity
b. Competition b. effective rate of interest
c. Free competition market c. nominal rate or annuity
d. Perfect Competition d. nominal rate of interest
58. This is a market situation wherein a given product is supplied by a very large number of 67. It is defined as the actual or exact rate of interest earned on a principal during1 year period
vendors and there is no restriction of any additional vendor from entering the market. a. effective rate of annuity
a. Market Structures b. effective rate of interest
b. Competition c. nominal rate or annuity
c. Free competition market d. exact simple interest
d. Perfect Competition 68. This refers to the difference between the future worth of a negotiable paper and its present
59. A place where the vendors or the sellers and vendees or the buyers come together is called worth.
a. Market Structures a. Depreciation
b. Market b. Market value
c. Free competition market c. Discount
d. Perfect Competition market d. Fair value
60. This is defined as the interest on a loan or principal that is based on the original amount of the 69. This refers to the sales of stock or share at reduced price
loan or principal. a. Depreciation
a. Ordinary Simple Interest b. Market value
b. Simple Interest c. Discount
c. Exact Simple Interest d. Fair value
d. Compound Interest 70. This is the deduction from the published price of services or goods.
61. This is based on one banker’s year. a. Depreciation
a. Ordinary Simple Interest b. Salvage value
b. Simple Interest c. Discount
c. Exact Simple Interest d. Fair value
d. Compound Interest 71. “Annuity” is simply defined as
62. __ is based on the exact number of days in a given year. a. series of equal payments occurring at equal time interval of time
a. Ordinary Simple Interest b. series of payments occurring at equal time interval
b. Simple Interest c. series of equal payments occurring at certain time interval
c. Exact Simple Interest d. series of divided payments at pay periods
d. Compound Interest 72. An annuity of a fixed time span is also called as
63. One banker’s year is equivalent to a. Ordinary annuity
a. 365 days b. Annuity Certain
b. 350 days c. Annuity Due
c. 12 months and 30 days d. Deferred Annuity
d. 12 months and 15 days 73. __ is the type of annuity where the payments are made at the beginning of each period starting
64. This is defined as the interest of loan or principal which is based on the amount of the original from the first period
loan and the previous accumulated interest a. Ordinary annuity
a. Ordinary Simple Interest b. Annuity Certain
b. Simple Interest c. Annuity Due
c. Exact Simple Interest d. Deferred Annuity
d. Compound Interest 74. An annuity where the payments are made at the end of each period beginning on the first
period
a. Ordinary annuity
b. Annuity Certain
c. Annuity Due
d. Deferred Annuity
75. It is when the first payment does not begin until some later date in the cash flow
Unit Operations Economics
a. Ordinary annuity c. value
b. Perpetuity d. capitalized cost
c. Annuity Due 86. Refers to the sum of its first cost and cost of perpetual maintenance of a property
d. Deferred Annuity a. Price
76. When an annuity does not have a fixed time span but continues indefinitely, then it is referred b. Market value
to as c. perpetual value
a. Ordinary annuity d. capitalized cost
b. Perpetuity 87. __ is a long term note or a financial security issued by businesses or corporation and
c. Annuity Due guaranteed on certain assets of the corporation or its subsidiaries.
d. Deferred Annuity a. Contract
77. This refers to the rate of interest that is quoted in the bond. b. Receipt
a. bond c. bond value
b. bond rate d. bond
c. bond value 88. This value implies that the property will still be use for the purpose it is intended
d. interest rate of bond value a. salvage value
78. It is the present worth of the future payments that will be received b. book value
a. book value c. use value
b. bond value d. depreciation
c. fair value 89. A depreciation computation method which is also known as Diminishing Balance Method
d. salvage value a. Sinking Fund Method
79. It is the amount a willing buyer will pay to a willing seller for a property where each has equal b. Straight-line Method
advantage and neither one of them is under compulsion to buy or sell c. Declining Balance method
a. Book value d. Break-even analysis
b. Market value 90. Also called as Constant- Percentage Method in depreciation method
c. Use value a. Sinking Fund Method
d. Fair value b. Straight-line Method
80. The amount of the property which the owner believed to be its worth as an operating unit is c. Declining Balance method
called d. Break-even analysis
a. value 91. This is also known as “Resale value”
b. Market value a. salvage value
c. Use value b. book value
d. Fair value c. use value
81. ___ is the amount obtained from the sale of the property. d. depreciation
a. book value 92. ___ is considered as the simplest type of business organization wherein the firm is controlled
b. bond value and owned by a single person
c. market value a. sole-proprietorship
d. salvage value b. Partnership
82. It is the worth of the property determined by a disinterested person c. Corporation
a. Book value d. Entrepreneurship
b. Market value 93. __ is a firm owned and controlled by two or more persons who are bind to an agreement
c. Use value a. sole-proprietorship
d. Fair value b. Partnership
83. It is the reduction or fall in the value of an asset or physical property during the course of its c. Corporation
working life due to the passage of time d. Entrepreneurship
a. Depreciation 94. It is a firm owned by a group of ordinary shareholders and the capital of which is divided up to
b. Depleting value the number of shares.
c. Discounted value a. sole-proprietorship
d. Fair value b. Partnership
84. __ is the money worth of an asset or product c. Corporation
a. Price d. Entrepreneurship
b. Market value
c. value
d. Fair value
85. This refers to the present worth of all profits that are to be received through ownership of a
particular property
a. Price
b. Market value
Unit Operations Economics
95. It is defined as a distinct legal entity separate from the individuals who owns it and can engage 4. This includes all engineering aspects involved in the development of either a new, modified or
in any business transaction which a real person could do. expanded industrial plant is called
a. sole-proprietorship a. plant design
b. Partnership b. optimum design
c. Corporation c. process design
d. Entrepreneurship d. engineering design
96. Also known as joint-stock company or a cooperative 5. A chemical engineering specializing in the economic aspects of design is called
a. Incorporation a. plant engineer
b. Partnership b. cost engineer
c. Corporation c. design engineer
d. Entrepreneurship d. process engineer
97. This refers to the situation where the sales generated are just enough to cover the fixed and 6. This refers to the actual design of the equipment and facilities for carrying out the process
variable cost. a. process engineering
a. break-even b. plant design
b. Break even chart c. process design
c. break even point d. optimum design
d. none of the above 7. The final step before construction plans for plant and includes complete specifications for all
98. The break even chart shows components of the plant and accurate costs based on quoted prices are obtained
a. the relationship between income and fixed cost a. preliminary design
b. the relationship between the volume and fixed cost, variable costs, and income b. quick estimate design
c. the relationship between the assets and fixed cost, variable costs, and income c. firm process design
d. the relationship between the liabilities and fixed cost, variable costs, and income d. detailed design estimate
99. The level of production where the total income is equal to the total expenses is known as 8. A thorough and systematic analysis of all factors that affect the possibility of success of a
a. break-even proposed undertaking usually dealing with the market, technical, financial, socio-economic
b. Break even chart and management aspects is called
c. break even point a. pr5oject feasibility study
d. none of the above b. plant design
100. The sum of perpetuity is a/an c. project development and research
a. book value d. product development
b. zero value 9. Discusses the nature of the product line, the technology necessary for production, its availability,
c. infinite value the proper mix of production resources and the optimum production volume
d. bond value a. market feasibility
b. socio-economic feasibility
c. technical feasibility
d. management feasibility
Board Problems: 10. Discusses the nature of the unsatisfied demand which the project seeks to meet growth and
the manner in which it is to be met
1. Design based on conditions giving the least cost per unit time and maximum profit per unit a. financial feasibility
production b. management feasibility
a. battery limit c. market feasibility
b. break-even point d. technical feasibility
c. optimum economic design 11. A multiple effect evaporator produces 10, 000 kg of salt from a 20% brine solution per day. One
d. plant design kg of steam evaporates 0.7 N kg of water in N effects at a cost of P25 per 1000 kg of steam.
2. A flow diagram, indicating the flow of materials, unit operations involved, equipment necessary The cost of the first effect is P450, 000 and the additional effects at P300, 000 each. The life
and special information on operating temperature and pressure is a of the evaporator is 10 years with no salvage value. The annual average cost of repair and
a. schematic diagram maintenance is 10% and taxes and insurance is 5%. The optimum number of effects for
b. qualitative flow diagram minimum annual cost is
c. process flow chart a. 3 effect
d. quantitative flow diagram b. 5 effects
3. In plant design implementation, soil testing is done to determine c. 4 effects
a. pH d. 2 effects
b. load bearing capacity 12. A process requires 20, 000 lb/hr of saturated steam at 115 psig. This is purchased from a
c. porosity neighboring plant at P18. 00 per short ton and the total energy content rate (mechanical) in
d, viscosity the steam may be valued at P7. 5 x 10-6 per Btu. Hours of operation per year are 7200. The
friction loss in the line is given by the following equation
F = 187.5 Lq 1.8 mc 0.20 in ft-lbs/lbm
Unit Operations Economics
d 0.20 Di 4.8 a. 23, 900 ft3
b. 24, 200 ft3
Cf = 1.44 Di 1.5 L , in p/yr c. 25, 900 ft3
d. 23, 500 ft3
Where: L = length of straight pipe, ft.
q = steam flow rate, cu. ft. per sec 17. April 1992.
mc = steam viscosity cp. A unit of welding machine cost P45, 000 with an estimated life of 5 years. Its salvage value id
d = steam density, lb per ft3 P2, 500. Find its depreciation rate by straight-line method.
Di = inside diameter of pipe, inches a. 17.75% b. 19.88% c. 18.89%
The optimum pipe diameter that should be used for transporting the above steam is d.15.56%
a. 6 in b. 4 in c. 3 in 18. April 1997.
d. 5 in A machine has an initial cost of P50, 000 and a salvage value of P10, 000 after 10 years. Find
13. A smelting furnace operating at 2, 400oF is to be insulated on the outside to reduce heat losses the book value after 5 years of using straight-line depreciation.
and same on energy. The furnace wall consists of a ½ inch steel plate and 4 inch thick a. P12, 500 b.P30, 000 c. P16, 400
refractory inner lining. During operation without other insulation, the outer surface of the steel d.P22, 300
plate exposed to air has a temperature of 300oF. Ambient air temperature is at 90oF. 19. October 1992.
Operation is 300 days per year. Thermal conductivities in Btu per hr-ftoF are: steel plate = 26; The initial cost of a paint sand mill, including its installation, is P800, 000. The BIR approved
refractory =0.1; insulation to be installed = 0.025. The combined radiation and convection loss life of this machine is 10 years for depreciation. The estimated salvage value of the mill is
to air irrespective of material exposed is 3 Btu per hr-ft2-oF, annual fixed charge is 20 % of the P50, 000 and the cost of dismantling is estimated is estimated to be P15, 000. Using straight-
initial insulation cost. If heat energy is P5.0 per 10, 000 Btu and installed cost of insulation is line depreciation, what is the annual depreciation charge and what is the book value of the
P100 per inch ft2 of area, the optimum thickness of the outer insulation that should be installed machine at the end of six years.
is a. P74, 500 ; P340, 250
a. 8 in b. 12 in c. 10 in d. 6 in b. P76, 500 ; P341, 000
14. An organic chemical is produced by a batch process. In this process chemical X and Y react to c. P76, 500 ; P 342, 500
form Z. Since the reaction rate is very high, the total time required per batch has been found d. P77, 500 ; P343, 250
to be independent of the amount of materials and each batch requires 2 hr, including time for 20. November 1997.
charging, heating, and dumping. The following equation shows the relation between the The cost of the equipment is P500, 000.00 and the cost of installation is P30, 000. If the
pound of Z produced (lbz) and the pound of X (lbx) and Y (lby) supplied: salvage value is 10% of the cost of equipment at the end of five years, determine the book
value at the end of the fourth year. Use straight-line method.
lbz = 1.5(1.1lbxlbz +1.3lbylbz – lbxlby)0.5 a. P155, 000 b.P140, 000 c. P146, 000
d. P132,600
Chemical X costs P0.09 per pound, chemical Y costs P0.04 per pound and chemical Z sells 21. April 1998.
for P0.8 per pound. If half of the selling price for chemical Z is due to cost other than raw An equipment costs P10, 000 with a salvage value of P500 at the end of 10 years. Calculate
materials, the maximum profit obtainable per pound of chemical Z is the annual depreciation cost by sinking fund method at 4% interest.
a. P0.3 per lbz a. P791.26 b.P950.00 c. P971.12
b. P0.5 per lbz d. P845.32
c. P0.12 per lbz 22. November 1995.
d. P0.25 per lbz A machine costing P720, 000 is estimated to have a book value of P40, 545.73 when retired
15. One hundred gram moles of R are to be produced hourly from a feed consisting of a saturated at the end of 10 years. Depreciation cost is computed using a constant percentage of the
solution of A. (Cao = 0.1 gmole per liter). The reaction is A R with rate ГR = (0.2/hr) Ca. declining book value. What is the annual rate of depreciation in %?
Cost of reactant at Cao = 0.1 gram mol per liter is P3.75/g-mole A; cost of backmix reactor, a.28 b. 25 c. 16
installed complete with auxiliary equipment, instrumentation, overhead, labor depreciation, d.30
etc. is P0.075 per hr-liter. The conversion that should be used for optimum operation is 23. November 1998.
a. 45% b. 60% c. 50% AMD Corporation makes it a policy that for any new equipment purchased; the annual
d. 40% depreciation cost should not exceed 20 % of the first cost at any time with no salvage value.
16. One hundred lb moles of reactant A at a concentration of 0.01 lbmole per cuft is to be reacted Determine the length of service life is necessary if the depreciation used is the SYD method.
with reactant B to produce R and S. The reaction follows the aqueous phase elementary a.9 years b. 10 years c. 12 years d.19
reaction: years
24. November 1996.
A + B ------- R +S where k = 500 cuft/(lbmole-hr). At 6%, find the capitalized cost of a bridged whose cost is P250M and the life is 20 years, if
the bridge must be partially rebuilt at a cost of P100M at the end of each 20 years.
The amount of R required is 95 lbmoles/hr. Data: a. P275.3M b.P265.5M c. P295.3M
* in extracting R from the reacted mixture, A and B are destroyed d. P282.1M
* B costs P15 per lbmole in crystalline form, and is very soluble in aqueous solutions 25. October 1995
such that even when present in large amount does not affect A in solution A company must relocate one of its factories in three years. Equipment for the loading dock is
* capital and operating cost for backmix reactor is P0.10 per(cuft-hr). being considered for purchase. The original cost is P20, 000; the salvage value of the
The optimum backmix reactor size is:
Unit Operations Economics
equipment after three years is P8, 000. The company’s rate return on the money is 10% . 26. a
Determine the capital recovery per years. 27. a
a. P5, 115 b.P4, 946 c. P5, 625 d. P4, 28. a
805
26. October 1998. Answer Key
The annual maintenance cost of a machine shop is P69, 994. if the cost of making a forging is Objective Problems
P56 per unit and its selling price is P135 per forged unit, find the number of units to be forged
to break-even. 1. a
a.886 units b. 885 units c. 688 units 2. a
d.668 units 3. a
27. October 1990. 4. b
Compute for the number of locks that an ice plant must be able to sell per month to break 5. d
even based on the following data: 6. c
Cost of electricity P20.00 7. a
Tax to be paid per block 2.00 8. a
Real Estate Tax 3, 500.00 per month 9. d
Salaries and wages 25, 000.00 per month 10. d
Others 12, 000.00 per month 11. d
Selling price of Ice 55.00 per block 12. b
a. 1228 b. 1285 c. 1373 13. d
d.1312 14. a
28. April 1998 15. d
XYX Corporation manufactures bookcases that sell for P65.00 each. It costs XYZ Corporation 16. a
P35, 000 per year to operate its plant. This sum includes rent, depreciation charges on 17. a
equipment, and salary payments. If the cost to produce one bookcase is P50.00, how many 18. a
cases must be sold each year for XYZ to avoid taking a loss? 19. b
a. 2334 b. 539 c. 750 20. b
d.2333 21. a
22. b
Answer Key 23. d
Board Problems 24. a
25. d
1. c 26. d
2. b 27. c
3. b 28. a
4. a 29. d
5. b 30. b
6. c 31. a
7. c 32. a
8. a 33. a
9. c 34. a
10. c 35. a
11. d 36. d
12. a 37. c
13. c 38. c
14. c 39. d
15. c 40. c
16. a 41. a
17. c 42. a
18. b 43. b
19. b 44. d
20. c 45. d
21. a 46. a
22. b 47. b
23. a 48. c
24. c 49. b
25. c 50. a
Unit Operations Economics
51. d cost of a similar heat exchanger with 200 ft2 of heating surface in 1980 if purchased-cost-
52. c capacity exponent is 0.60 for surface area ranging from 100-400 ft2?
53. c a. $4 547.15
54. d b. $4 127.25
55. d c. $4 567.10
56. a d. $4523.00
57. b 2. efer to problem no. 1. If the purchased-cost-capacity exponent for this type of exchanger
58. d is 0.81 for surface areas ranging from 400-2,000 ft2, what will be the purchased cost of a
59. b heat exchanger with1, 000 ft2 of heating surface in 1985?
60. b a. $20 423.38
61. a b. $18 527.12
62. c c. $14 547.00
63. c d. $24 542.05
64. d 3. If the purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel
65. b tubes) with 100 ft2 of heating surface was $3,000 in 1980. Note that the purchase-cost-
66. d capacity exponent is not constant over range surface area requested. What will be the
67. b purchased cost of a heat exchanger with 700 ft2 of heating surface in 1985?
68. c a. $15 398.79
69. c b. $15 298.79
70. c c. $16 498.79
71. a d. $16 598.79
72. b 4. From the preceding question, what will be the purchased cost of the heat exchanger with
73. c 800 ft2 of heating surface in 1985?
74. a a. $18 046.32
75. d b. $18 146.32
76. b c. $17 046.32
77. b d. $17 146.32
78. b 5. Refer to problem no. 3. What will be the purchased cost of the heat exchanger with
79. b 1500 ft2 of heating surface in 1985?
80. c a. $38 363.62
81. d b. $48 363.62
82. d c. $18 363.62
83. a d. $28363.62
84. c
85. c 6. The purchase and installation cost of some pieces of equipment are given as a function
86. d of weight rather than capacity. An example of this is the installed cost of large tanks. The
87. d 1980 cost for an installed aluminum tank weighing 100,000 lb was $390,000. For a size
88. a range from 200,000 to 1,000,000 ld, the installed cost-weight exponent for aluminum
89. c tanks is 0.93. If an aluminum tank weighing 700,000 lb is required, what is the present
90. c capital investment needed?
91. a a. $3 160 100
92. a b. $3 060 000
93. b c. $6 160 100
94. c d. $6 060 000
95. c 7. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel
96. c processing plant) is $300,000. The plant is to be an addition to an existing formaldehyde
97. a plant. The major part of the building cost will be for indoor construction, and the
98. b contractor’s fee will be 7% of the direct plant cost. All other costs are close to the
99. c average values found for typical chemical plants. On the basis of this information,
100. c estimate the total direct plant cost.
a. $879 000
b. $879 253
Problem Solving c. $890 560
d. $825 020
1. The purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel 8. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel
tubes) with 100 ft2 of heating surface was $3,000 in 1980. What will be the purchased processing plant) is $300,000. The plant is to be an addition to an existing formaldehyde
plant. The major part of the building cost will be for indoor construction, and the
Unit Operations Economics
contractor’s fee will be 7% of the direct plant cost. All other costs are close to the a. $154 793.41
average values found for typical chemical plants. On the basis of this information, b. $456 793.41
estimate the fixed capital investment. c. $129 793.41
a. $ 1 246 530 d. $209 793.41
b. $ 2 336 230 15. Referring to the previous problem, estimate the compound amount accumulated at the
c. $ 2 546 531 end of ten years, if the payment is made weekly?
d. $ 1 246 830 a. $143 951.49
b. $243 951.49
9. Refer to the previous problem and on the basis of this information, what is the total c. $443 951.49
capital investment? d. $643 951.49
a. $1 542 125 16. A multiple – effect evaporator is to be used for evaporating 400,000 lb of water per day
b. $1 478 570 from a salt solution. The total initial cost for the 1st effect is $18,000 and each additional
c. $1 532 120 effect costs $15,000. The life period is estimated to be 10 years, and the scrap value at
d. $1 468 530 the end of the life period may be assumed to be zero. The straight-line depreciation
10. The total capital investment for a chemical plant is $1,500,000 and the plant process 3M method is used. Fixed charges minus depreciation are 15% yearly based on the first cost
kg of product annually. The selling price of the product is $0.82/kg. Working capital of the equipment. Steam cost $1.50 per 1000 lb. Annual maintenance charges are 5% of
amounts to 15% of the total capital investment. The investment is from company funds, the initial equipment cost. All other cost is independent of the number of effects. The unit
and no interest is charged. Raw-material costs for the product are $0.09/kg, labor will operate 300 days per year. If the lb of water evaporated per pound of steam equals
$0.08/kg, utilities $0.05/kg, and packaging $0.008/kg. Distribution costs are 5% of the 0.85 x numbers of effects, determine the optimum number of effects for minimum annual
total product cost. Determine the percent change in total cost. cost.
a. 36.16% a. 2 effects
b. 45.32% b. 3 effects
c. 12.00% c. 5 effects
d. 35.61% d. 4 effects
11. It is desired to have a $ 9000 available from 12 years from now. If $ 5000 is available for 17. Determine the optimum economic thickness of insulation that should be used under the
investment at the present time, what is discrete annual rate of compound interest on the following conditions: Standard steam is being passed continuously through a steel pipe
investment would be necessary to give the desired amount? with an outside diameter of 10.75 in. The temperature of the steam is 400F, and the
a. 6.02% steam is valued at $1.80 per 1000 lb. The pipe is to be insulated with material that has a
b. 5.02% thermal conductivity of 0.03 Btu/h-ft2-F/ft. The cost of installed insulation per foot of pipe
c. 4.02% length is $4.5xIt, where It is the thickness of the insulation in inches. Annual fixed
d. 3.05% charges including maintenance amount to 20% of the initial installed cost. The total
12. An original loan of $2000 was made at 6 percent simple interest per year for 4 years. At length of the pipe is 1000 ft, and the average temperature of the surrounding may be
the end of this time, no interest had been paid and the loan was extended for 6 more taken as 70F. Heat transfer resistance due to the steam film, scale and pipe wall are
years at a new, effective, compound-interest rate of 8 percent per year. What is the total negligible. The air –film coefficient at the outside of the insulation may be assumed
amount owned at the end of ten years if no intermediate payments are made? constant at 2.0 Btu/h-ft2-F for all insulation thickness.
a. $4 935.45 a. $3257
b. $3 945.45 b. $4057
c. $4 945.45 c. $3057
d. $3935.45 The original cost for a distillation tower is $24,000 and the useful life of d. $4257
the tower is estimated to be 8 years. The sinking fund method for determining the 18. A proposed chemical plant will require a fixed capital investment of $10 million. It is
arte of depreciation is used, and the effective annual interest for the depreciation estimated that the working capital will amount to 25% of the total investment and annual
fund is 6 percent. If the scrap value of the distillation tower is $ 4000, determine the depreciation costs are estimated to be 10 percent of the fixed capital investment. If the
asset value at the end of 5 years. annual profit will be $3 million, determine the standard percent return on the total
a. $ 3,547.928 investment
b. $2 235.623 a. 22.5%
c. $2 547.928 b. 11.25%
d. $3 235.623 c. 34.5%
13. An annuity is due to being used to accumulate money. Interest is compounded at an d. 15.98%
effective annual rate of 8 %, and $1000 is deposited at the beginning of each year. What 19. If a plant will require a fixed capital investment of $10 million and the working capital will
will be the total amount of annuity due be after 5 years? amount to 25% of the total investment and annual depreciation costs are estimated to be
a. $1233.24 10 percent of the fixed capital investment. If the annual profit will be $3 million, what is
b. $1173.32 the minimum payout period (POP)?
c. $3573.2 a. 2.5 years
d. $183.23 b. 4 years
14. For the total year payments of $5000 for ten years, what will be the compound amount c. 3.5 years
accumulated at the end of ten years if the payment is at the end of the year? The d. 2 years
effective (annual) interest is 20% and payments are uniform.
Unit Operations Economics
20. An annual investigation of a proposed investment has been made. The following result a. $0.00297/lb
has been presented to management. The minimum payout period based on capital b. $0.0297/lb
recovery using a minimum annual return of 10 percent as a fictitious expense is 10 c. $0.2297/lb
years; annual depreciation costs amount top 8 percent of the total investment. Using this d. $0.2970/lb
information, determine the standard rate of return on the investment. 24. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
a. 21% account for the month of August by “FiFo” method.
b. 10.5% a. $0.281/lb
c. 56.93% b. $0.028/lb
d. 11.5% c. $0.038/lb
21. The information given in the previous problem, applies to conditions before income d. $0.128/lb
taxes. If 34% percent of all profits must be paid out for income taxes, determine the 25. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
standard rate of return after taxes using the figures given in the previous problem. account for the month of August by lifo method.
a. 7.93% a. $0.031/lb
b. 6.93% b. $0.041/lb
c. 4.93% c. $2.031/lb
d. 5.93% d. $1.041/lb
22. A capitalized cost for a piece of equipment has been found to be $55,000. This cost is For question nos. 27 – 31.
based on the original cost plus the present value of an indefinite number of renewals. An The following are the data gathered from the AMD Food Corporation:
annual interest rate of 12% was used in determining the capitalized cost. The salvage
value of the equipment at the end of the service life was estimated to be 10 years. Under
Cash $20,000
these conditions, what would be the original cost of the equipment?
a. $57 391.47
Accounts payable:
b. $27 291.47
B Company 2,000
c. $47 391.47
C Company 8,000
d. $37 291.47
For problems 24- 26.On Aug. 1, a concern had 10,000 lb of raw material on hand, which was
Accounts receivable 6,000
purchased at a cost of $0.030 per pound. In order to build up the reserve, 8000 lb of additional raw
Inventories 15,000
material was purchased on Aug. 15 at a cost of $0.028 per pound. If none of the raw material was
Mortgage payable 5,000
used until after the last purchase.
Common stock sold 50,000
23. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
Machinery and equipment (at present value) 18,000
account for the month of August by current average method.
Furniture and fixtures (at present value) 5,000
Government bonds 3,000
Surplus 2,000

26. From the data given above, determine the total asset of the AMD Food Corporation.
a. $ 47, 050
b. $ 67, 000
c. $ 87, 050
d. $ 57, 000
27. Determine the total current assets of the AMD Food Corporation.
a. $ 11,000
b. $ 44,000
c. $ 22,000
d. $ 33,000
28. What is the total amount of the Current liabilities of the AMD Corporation?
a. $ 45,097
b. $ 85,097
c. $ 25,000
d. $ 15,000
29. What is the total amount of the Fixed Assets of the AMD Food Corporation?
Unit Operations Economics
a. $ 23,000 a. $6,100
b. $ 33,050 b. $7,100
c. $ 32,000 c. $7,900
d. $ 23,050 d. $6,900
During the month of October, the following information was obtained in the AC antifreeze retailing 33. Determine the current asset for MADSteel Company
company: a. $8, 700
b. $9, 500
Salaries $ 3,000 c. $8, 500
Delivery expenses 700 d. $9, 700
Rent 400 34. Determine the current liabilities of MADSteel Company
Sales 15,100 a. $5, 540
Antifreeze available for sale during October (at cost) 20,000 b. $1, 540
Antifreeze inventory on Oct. 31 (at cost) 11,000 c. $3, 540
Other expenses 1,200 d. $2, 540
Earned surplus before income taxes as of Sept.30 800 35. Determine the Quick ratio for MADSteel Company
a. 2.29
b. 9.87
30. Prepare an income statement for the month of October to determine the net income is for c. 2.56
the month of October. d. 9.56
a. $ 29,100 36. Determine the current ratio of MADSteel Company
b. $ 19,200 a. 2.74
c. $ 29,200 b. 2.56
d. $ 19,100 c. 2.64
31. From the data above, determine also the total gross income of the AC Antifreeze d. 1.98
Company. 37. A reactor of special design is the major item of equipment in a small chemical plant. The
a. $26,900 initial cost of a completely installed reactor is $60,000, and the salvage value at the end
b. $36,100 of the useful life is estimated to be $10,000. Excluding depreciation costs for the reactor,
c. $26,100 the total annual expenses for the plant are $100,000. How many years of useful life
d. $46,900 should be estimated for the reactor if 12 % of the total annual expenses for the plant are
The following information applies to MADSteel Company on a given date: due to the cost for the reactor depreciation? The straight-line method for determining
depreciation should be used.
Long-term debts $ 1,600 a. 4 years
Debts due within 1 year 1,000 b. 2 years
Accounts payable 2,300 c. 8years
Machinery and equipment (at cost) 10,000 d. 1year
Cash in bank 3,100 38. The initial installed cost for a new piece of equipment is $10,000, and its scrap value at
Prepaid rent 300 the end of its useful life is estimated to be $2,000. The useful life is estimated to be 10
Government bonds 3,000 years. After the equipment has been in use for 4 years, it is sold for $7,000. The
Social security taxes payable 240 company which originally owned the equipment employs the straight-line method for
Reserve for depreciation 600 determining depreciation costs. If the company had used an alternative method for
Reserve for expansion 1,200 determining depreciation cost, the asset (or book) value for the piece of equipment at the
Inventory 1,600 end of 4 years would have been $5240. The total income-tax rate for the company is
Accounts receivable 1,700 34% of all gross earnings. Capital-gains taxes amount to 34% of the gain. How much net
saving after taxes would the company have achieved by using the alternative (in this
case, reducing-balance) depreciation method instead of the straight-line depreciation
method?
a. $2161.60
b. $1261.07
c. $1171.70
d. $1161.60
32. Determine the cash asset for the MADSteel Company at the given date. 39. A piece of equipment is originally costing $40,000 was put into use 12 years ago. At the
time the equipment was put into use, the service life was estimated to be 20 years and
the salvage and scrap value at the end of the service life were assumed to be zero. On
this basis, the straight-line depreciation fund was set up. The equipment can now be sold
for $10,000, and a more advanced model can be installed for $55,000. Assuming the
depreciation fund is available for use, how much new capital must be supplied to make
the purchase?
Unit Operations Economics
a. $22,000 c. $26,356.72
b. $21,000 d. $16,285.72
c. $12,000 47. The total value of anew plant is $2 million. A certificate of necessity has been obtained
d. $11,000 permitting a write-off of 60 percent of the initial value ay 5 years. The balance of the plant
40. The original investment for an asset was $10,000, and the asset was assumed to have a requires a write-off period of 15 years. Using the straight-line method and assuming
service life of 12 years with $2,000 salvage value at the end of the service life. After the negligible salvage and scrap value, determine the total depreciation cost during the first
asset has been in use for 5 years, the remaining service life and the final salvage value year.
are reestimated at 10 years and $ 1,000, respectively. Under these conditions, what is a. $ 35, 555. 33/ yr
the depreciation cost during the sixth year of the total life is straight-line depreciation is b. $ 55, 333. 33/ yr
used? c. $ 35, 333. 33/ yr
a. $596.65/yr d. $ 53, 333. 33/ yr
b. $561.66/yr 50. A profit-producing property has an initial value of $50,000, a service life of 10 years, and
c. $678.65/yr zero salvage and scraps value. By how much would annual profits before taxes be
d. $566.66/yr increased if a 5 percent sinking-fund method were used to determine depreciation costs
A piece of equipment having a negligible salvage and scrap value is estimated to have a service instead of straight-line method?
life of 10 years. The original cost of the equipment was $40,000. Determine the following: a. $ 3 556.24
41. Based on the above data, determine the depreciation charge for the fifth year if double- b. $ 3 354.35
declining balance depreciation is used. c. $ 3 484.31
a. $ 3,567.2 d. $ 3.034.35
b. $ 3,276.80 51. In order to make it worthwhile to purchase a new piece of equipment, the annual
c. $ 4, 245.80 depreciation costs for the equipment cannot exceed $3,000 at any time. The original cost
d. $ 4,252.80 of the equipment is $30,000, and it has a zero salvage and scrap value. Determine the
42. The depreciation charge for the fifth year if sum-of-the-years-digits depreciation is used. length of service life necessary if the equipment is depreciated by the sum=of-the-years-
a. $ 4,363.64 digits method by the straight-line method.
b. $ 5,572.14 a. 19 years
c. $ 8,265.52 b. 23 years
d. $ 9,356.45 c. 17 years
43. The percent of the original investment paid off in the first half of the service life using the d. 18 years
double-declining balance method. 52. Referring to the previous number, determine the length of service life necessary if the
a. 32.8% equipment is depreciated by the straight-line method.
b. 67.4% a. 8 years
c. 23.4% b.10 years
d. 54.2% c. 12 years
44. The percent of the original investment paid off in the first half of the service life using the d. 9 years
sum-of-the-years-digits method.
a. 45.45% A materials-testing machine was purchased for $20,000 and was to be used for 5 years with an
b. 54.54% expected residual salvage value of $5,000. Graph the annual depreciation charges and year-end
c. 23.23% book values obtained by using:
d. 35.53% 53. By using Straight-line depreciation
45. The original cost of the property is $30,000, and it is depreciated by a 6 percent sinking- a. $ 6,000
fund method. What is the annual depreciation charge if the book value of the property b. $ 5,000
after 10 years is the same as if it had depreciated at $2,500/year by the straight-line c. $ 9,000
method? d. $ 7,000
a. $ 167.67/yr 54.By using Sum-of-digits depreciation
b. $ 267.67/yr a. $ 6,000
c. $ 289.67/yr b. $ 5,000
d. $ 189.67/yr c. $ 9,000
46. A concern has a total income of $1 million/year, and all expenses except depreciation d. $ 7,000
amount to $600,000/year. At the start of the first year of the concern’s operation, a
composite account of all depreciable items show a value of $850,000, and the overall 55. By using Double-declining balance depreciation
service life is estimated to be 20 years. The total salvage value at the end of the service a. $ 625
life is estimated to be $50,000. Thirty percent of all profits before taxed must be paid out b. $ 675
as income taxes. What would be the reduction in income-tax charges for the first year of c. $278
operation if the sum-of-the-years-digits methods were used for depreciation accounting d. $955
instead of the straight-line method? 56. An asset with an original cost of $10,000 and no salvage value has a depreciation charge of
a. $16,356.72 $2381 during its second year of service when depreciated by the sum-of-digits method.
b. $26,285.72 What is its expected useful life?
Unit Operations Economics
a. 6 years 63. The total depreciation after 5 years.
b. 4 years a. P819.12
c. 9 years b. P562.23
d. 2 years c. P456.26
57. An electronic balance costs P90, 000 and has an estimated salvage value of P8, 000 at the d. P895.23
end of its 10 years lifetime. What would be the book value after 3 years, using straight-line 64. Estimate the book value at the end year for 5 years.
method in solving for the depreciation? a. P1, 180.98
a. P 65,200 b. P5, 125.25
b. P 76,466 c. P1, 256.32
c. P 24, 674 d. P5, 235.00
d. P 21,758 65. Determine the rate of depreciation, the total depreciation up to the end of 8 th year and
A broadcasting corporation purchased equipment for P53, 000 and paid P1, 5000 for freight and book value at the end of 8 years for an asset that costs P15,000 new and has an
delivery charges top the job sites. The equipment has a normal life of 10 year with a trade-in value estimated scrap value of P2,000 at the end of 10 years by DBM.
of P5, 000 against the purchase of anew equipment at the end of the life. a. P 12,108
58. Referring to the problem above, determine the annual depreciation by straight-line b. P12, 008
method. c. P11,355
a. P4, 950 d. P10,245
b. P5, 950 66. Determine the rate of depreciation, the total depreciation up to the end of 8 th year and
c. P7, 950 book value at the end of 8 years for an asset that costs P15, 000 new and has an
d. P3, 950 estimated scrap value of P2, 000 at the end of 10 years by DDBM.
59. From the preceding number, determine annual depreciation by sinking fund method. Assuming a. P 12,583
interest 6 ½% compounded annually. b. P 10,483
a. P 3,668 c. P 12,483
b. P 1,575 d. P 10,583
c. P 4,245 67. Mr. Dim bought a calciner for P220, 000 and used it for 10 years, the life span of the
d. P6,258 equipment. What is the book value of the calciner after 5 years of use? Assume a scrap
value of P20, 000 for SLM;
A firm brought equipment for P56, 000. Other expenses including installation amounted to P4, 000. a. P 120,566
The equipment is expected to have a life of 16 years with a salvage value of 10% of the original b. P 120,452
cost. c. P 120,000
60. Determine the book value at the end of 12 years by SLM: d. P 130,000
a. P19, 500 68. Refer to the previous problem. What is the book value of the calciner after 5 years of
b. P20,555 use? Assume a scrap value of P22, 000 for textbook for DBM.
c. P15,582 a. P 96, 570.00
d. P18, 562 b. P 69, 235.00
61. Determine the book value at the end of 12 years by SFM: c. P 59, 235.00
a. P29, 520 d. P 69, 570.00
b. P29, 520 69. Refer to the previous problem. What is the book value of the calciner after 5 years of
c. P29, 520 use? Assume a scrap value of P20, 000 for textbook for DDBM.
d. P29, 520 a. P72 091
b. P72 356
c. P71 190
For numbers 62 – 64. A certain type of machine losses 10% of its value each year. The machine d. P72 090
cost P2, 000 originally. Make cut a schedule showing the following: 70. A structure costs P12, 000 new. It is estimated to have a life of 5 years with a salvage
62. By yearly depreciation value at the end of life of P1, 000. Determine the book value at the end of three years.
a.131.32 a. 733
b.132.12 b. 562
c.123.23 c. 252
d. 213.20 d. 377
71. Operator A produces 120 spindle/hr on a lathe. His hourly rate is $1.80. Operator B,
using an identical lathe, is able to produce 150 identically units/hr. The overhead charge
for a lathe is fixed at $2.50/hr. Determine operator B’s hourly rate so that his cost per
piece is identical to A’s.
Unit Operations Economics
a. $2.88 a. 11 years
b. $3.88 b. 12 years
c. 4.88 c. 14 years
d. 1.88 d. 13 years
72. In a type 1 warehouse, initial cost will be $24, 000.This warehouse has adequate 79. The total cost of a cast product consists of (1) the raw material cost that is directly
capacity for the near future, but 12 years from now an addition will be required that costs proportional to the weight, of the casting, (2) the machining cost that varies inversely as
$15, 000. A type 2 warehouse costs $34, 000. This type has the same capacity as the the weight, and (3) overhead cost that remains constant per unit produced regardless of
type 1 warehouse with its addition. What will be the present cost of the type 1 weight. Find the weight giving the minimum cost per casting.
warehouse? Which of these should be built, assuming that depreciation is negligible and a. W = (k1/k2)1/4 lb
that the interest rate is 7%? b. W = (k2/k1)1/2 lb
a. $30, 540 c. W = (k2/k1)1/4 lb
b. $30,660 d. W = (k1/k2)1/2 lb
c. $23, 548 80. Based on the previous problem, what is the minimum total cost?
d. $15,235 a. Ct = [k2(k2 / k1)1/2 = k2 (k1 / k2) 1/4+ Co]
73. Determine the equal (year-end) payments that will be available for the next four years if b. Ct = [k1(k2 / k1)1/2 = k2 (k1 / k2) ½ + Co]
we invest $4, 000 at 6%. c. Ct = [k1(k2 / k1)1/4 = k2 (k2 / k1) ½ + Co]
a. $2533.23 d. Ct = [k2(k1 / k1)1/4 = k2 (k1 / k2) ½ + Co]
b. $2322.25 81. Methyl alcohol condensed at 148 F is to be cooled to 100 F for storage at a rate of 10,
c. $1123.25 000gal/hr by water available at 75 F in a countercurrent heat exchanger. The over-all
d. $1154.36 heat transfer coefficient is constant and estimated at 200 Btu/ft 2-hr-F. Heat exchanger
74. A new snow removal machine costs $50, 000. The new machine will operate at a annual costs including operation are estimated at $2 per ft 2 including depreciation. The
reputed savings of $400 per day over the present equipment in terms of time and cooler is to operate 5, 000 hr/year, and the value of heat utilized is estimated at $5x10 -7
efficiency. If interest is at 5% and the machine’s life is assumed to be 10 years with zero per Btu. What is the estimated optimum cost of the heat exchanger if the cost for surface
salvage, how many days per year must the machine be used to make the investment is $9 per ft2?
economical? a. $4, 014
a. 15 days b. $4,123
b. 16 days c. $5,545
c. 14 days d. $5,123
d. 12 days 82. What is the most economical number of effects to use in the recovery of black liquor in a
75. Based on the sinking fund method and using the data in the previous problem, what paper plant if the following cost data are available? The annual fixed costs increase
number of days must the machine be used if the amount to be accumulated in 10 years essentially linearly with each effect (except for condensing, feeding, and other equipment
is a. $50, 000 costs for multiple units which may be considered to balance each other). If a fixed
b. $60,000 amount of evaporation is to be obtained and each units to have 1, 000 ft 2 of heating
c. $55,000 surface with a service life of five years, the annual fixed costs Cf would be (using cost
d. $45, 000 data of $25, 000 for a single evaporator of 5, 000 ft2, employing the 0.6 factor, and
76. Based on the sinking fund method and using the data in the previous problem, what neglecting the interest).
number of days must the machine be used if the amount to be accumulated in 10 years Cf =( 1, 000)0.6 25, 000 N ……. dollars per year
is $50, 000? 5, 000 5
a. 12 days where N is the number of effects.
b. 10 days Because of the steam economy in multiple-effect operation, the direct costs for steam
c. 14 days will decrease and the total of all annual direct costs, CD, has been established for this type of
d. 13 days operation as
77. A consulting engineer decides to set up an educational fund for his son that will provide CD = 65, 000 N -0.95 dollars
$3000 per year for 6 years starting in 16 years. The best interest rate he can expect to a. 4 effects
get is 5% compounded quarterly. He wants to accumulate the necessary capital by b. 2 effects
making quarterly deposits until his son starts college. What will be his needed quarterly c. 6 effects
deposit? d. 5 effects
a. $15, 210 83. A capitalized cost for a piece of equipment has been found to be $55, 000. This cost is
b. $16,213 based on the original cost plus the present value of an indefinite number of renewals. An
c. $15, 213 annual interest rate of 12% was used in determining the capitalized cost. The salvage
d. $16, 210 value of the equipment at the end of the service life was estimated to be 10 years. Under
78. A low carbon steel machine part, costing $350 installed, lasts 6 years when operating in these conditions, what would be the original cost of the equipment?
a corrosive atmosphere. An identically shaped part, but treated for corrosion resistance, a. $36, 861.47
would cost $650 installed. How long would the corrosion resistance part have to last to b. $32, 251.47
be at least as good investment as the untreated part? Assume money is worth 7% c. $27, 291.47
d. $37, 291.47
Unit Operations Economics
84. A heat treating furnace is used to preheat small steel parts. The furnace uses fuel oil a. $74.6
consisting $0.04 per gallon, with a heating value of 142, 000Btu/gal. The furnace has a b. $56.2
firebrick lining, the outside temperature of which is 1210 F, this is to be covered with c. $15.2
insulation costing $300 per 1000 board feet. The air temperature is 110 F. Operations is d. $14.0
7200 hr/yr. Conductivity is 0.028 for insulation in Btu/hr-ft2-F. Calculate the most 90. Determine the selling price in dollars per ton (100% mineral basis) required for which the
economical thickness of insulation. Furnace life is 8 years. Assume negligible cost of the n new equipment is justified.
temperature drop from insulation to air. a. $ 123.12
a. 5.52 in b. $ 123.50
b. 5.24 in c. $ 263.25
c. 5.48 in d. $ 263.13
d. 5.45 in 91. What is the % increase in recovery and rejection for the new process based on mineral
85. A batch inorganic chemical operations gives product C from two chemicals A and B and gauged?
according to the following empirical relation: a. 42.567%
C = 2.8 (AB – AC – 1.2 BC + 0.5C2 )0.5 b. 22.224%
where A, B and C are pounds of respective components. The reaction rate is sufficiently high to be c. 52.677%
neglected, and the time to make any batch is essentially the charging and discharging time, d. 12.235%
including heating up, which totals 1 hr. If A costs $0.10 per lb and B costs $0.05 per lb, what is the 92. A ties on a plant railroad sliding are to be replaced. Untreated ties consisting $ 2.50
ratio of B to A to give the minimum costs of raw materials per lb of product . what is the cost per lb installed have a life of 7 years. If created ties have a life of 10 years, what is the
of C? maximum installed cost that should be paid for treated ties if money is worth 8 percent?
a. $4.08 a. $3.15
b. $3.23 b. $3.10
c. $4.23 c. $3.25
d. $3.08 d. $3.20
86. Based from the previous problem, what is the cost per lb of C? 93. Powdered coal having a heating value of 13, 500 Btu/ lb is to be compared with fuel oil
a. $4.08 worth $2.00 per bbl (42 gal) having a heating value of 130,000 Btu/gal as a source of fuel
b. $3.23 in the processing plant. If the efficiency of the conversion of the fuel is 64% for coal and
c. $4.23 72 % for oil, with all other costs being equal, what is the maximum allowable selling price
d. $3.08 for coal per ton?
87. Seven million pounds of water per year is to be obtained from 8 percent solids slurry to a. $15.13 / ton
be filtered on a leaf filter to produce a cake containing 40 percent solids. The area of the b. $11.13 / ton
filter is 200 ft2. Tests show a value of 2 x 104 for k in pound units. The cake is not c. $21.13 / ton
washed. The dumping and cleaning time is 3 hr and costs $39 each cycle. Filtration d. $25.13 / ton
costs are $14 per hr, and inventory charges maybe neglected. What is the cycle time for 94. A steam boiler is purchased on the basis of guaranteed performance. However, initial
minimum costs? tests indicate that the opening (income) cost will be P400 more per year than
a. 0.014 hrs guaranteed. If the expected life is 25 years and money is worth 10 %, what deduction
b. 0.015 hrs from the purchase price would compensate the buyer for the additional operating cost?
c. 1 hr a. 3, 635.82 pesos
d. 0.25 hrs b. 3, 660.82 pesos
88. Referring to the previous problem, calculate the cycle time for maximum production. c. 3,560.82 pesos
a. 3.04 hrs. d. 3, 630.82 pesos
b. 2.04 hrs 95. If the sum of P12, 000 is deposited in an account earning interest at the rate of 9%
c. 3.52 hrs compounded quarterly, what will it become at the end of 8 years?
d. 1.02 hrs a. 14, 857.24
b. 34, 457.24
For nos. 89- 91. c. 14, 527.24
In processing 500 ton/day of ore assaying 50% mineral, 300 tons of concentrate containing 66.7 % d. 24, 457.24
are obtained at a cost of sales ( all fixed operating cost are excluded) of $15 per ton concentrate. 96. At a certain interest rate compounded quarterly, P1, 000 will amount to P4, 500 in 15
An investment of $200, 000 of concentrate that will assay 71% mineral. If the plant operates 200 years. What is the amount at the end of 10 years?
days/year, equipment must pay out in 5 years with interest at 15% and no salvage value and no a. 2, 125.17 pesos
additional labor or repair costs need to be considered. b. 2, 725.17 pesos
c. 2, 625.17 pesos
89. Based on the stated problem above, calculate the additional cost per ton of concentrate
for capital recovery on the new equipment.
Unit Operations Economics
d. 2, 845.17 pesos REQUIRED:
97. A one bagger concrete mixer can be purchased with a down payment of P8, 000 and $ of 1,000 ft2 in 1985
equal installments of P600 each paid at the end of every month for the next 12 months. If SOLUTION:
the money is worth 12% compounded monthly, determine the equivalent cash prize of using table 3, page 163 (Cost indexes as annual average)
the mixer. where: 1980 = 560, and 1985 = 790
a. 4, 753.05 pesos 0.6
b. 34, 753.05 pesos  400 ft2 
cost = $3,000  2 
 100 ft 
c. 24, 753.05 pesos
d. 14, 753.05 pesos
98. A certain company makes it the policy that for any new piece of equipment, the annual
depreciation cost should not exceed 10% of the original cost at any time with no salvage cost = $6,892.19
or scrap value. Determine the length of service life necessary if the depreciation method
use is straight line formula.
a. 10 years
0.81
b. 12 years  1,000 ft2   790 
c. 18 years cost1985 = $6,892.19  2   
d. 8 years  400ft   560 
99. Solve the previous problem with the sinking fund formula at 8%
a. 8 years
b. 10 years
cost1985 = $20, 423.38
c. 6 years
d. 12 years 3. If the purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel tubes)
100. Determine the ordinary simple interest on $10, 000 for 9 months and 10 days if the rate with 100 ft2 of heating surface was $3,000 in 1980. Note that the purchase-cost-capacity exponent
of interest is 12%. is not constant over range surface area requested. What will be the purchased cost of a heat
a. $433.33 exchanger with 700 ft2 of heating surface in 1985?
b. $633.33 GIVEN:
c. $333.33 A = 100 to 2,000 ft2
d. $933.33 Present year = 1980
P1980 = $3,000
Answers: REQUIRED:
1985 purchase cost with 700 ft2
1. The purchased cost of a shell-and-tube heat exchanger (floating head and carbon-steel tubes) SOLUTION:
with 100 ft2 of heating surface was $3,000 in 1980. What will be the purchased cost of a similar Using table 3, page 163 (Cost indexes as annual average)
heat exchanger with 200 ft2 of heating surface in 1980 if purchased-cost-capacity exponent is 0.60 Where: 1980 = 560, and 1985 = 790
for surface area ranging from 100-400 ft2? For 200 ft2
GIVEN: 0.60
A1 = 100 ft2 i100-400 = 0.60  200   790 
P1980 = $3, 000 i400-1,000 = 0.81 C1985 = $3,000    
A2 = 200 ft2  100   560 
REQUIRED:
$ of 200 ft2 in 1980 C1985 = $6,414.73
SOLUTION: For 300 ft2
0.6 0.60
 200 ft  2
 300 
cost200 ft2 = $3,000  2 
C1985 = $6,414.73  
 100 ft   200 
C1985 = $8,181.50
cost 200 ft2 = $4, 547.15
For 400 ft2
0.60
 400 
2. Refer to problem no. 1. If the purchased-cost-capacity exponent for this type of exchanger is C1985 = $8,181.50  
0.81 for surface areas ranging from 400-2,000 ft2, what will be the purchased cost of a heat  300 
exchanger with1, 000 ft2 of heating surface in 1985?
GIVEN: C1985 = $9,722.91
A1 = 100 ft2 i100-400 = 0.60 For 500 ft2
P1980 = S3,000 i400-1,000 = 0.81
A2 = 200 ft2
Unit Operations Economics
0.81 0.81
 500   800 
C1985 = $9,722.91  C1985 = $15,298.79  
 400   700 
C1985 = $11,649.13 C1985 = $17,046.32
For 600 ft2 For 1,000 ft2
0.81 0.81
 600   1,000 
C1985 = $11,649.13   C1985 = $17,046.32  
 500   800 
C1985 = $13,503.00 C1985 = $20,423.39
For 700 ft2 For 1,500 ft2
0.81 0.81
 700   1,500 
C1985 = $13,503.00   C1985 = $20,423.39  
 600   1,000 
C1985 = $15,298.79 C1985 = $28,363.62
4. From the preceding question, what will be the purchased cost of the heat exchanger with 800 ft 2
of heating surface in 1985? 6. The purchase and installation cost of some pieces of equipment are given as a function of
GIVEN: weight rather than capacity. An example of this is the installed cost of large tanks. The 1980 cost
A = 100 to 2,000 ft2 for an installed aluminum tank weighing 100,000 lb was $390,000. For a size range from 200,000
Present year = 1980 to 1,000,000 ld, the installed cost-weight exponent for aluminum tanks is 0.93. If an aluminum tank
P1980 = $3,000 weighing 700,000 lb is required, what is the present capital investment needed?
REQUIRED: GIVEN:
1985 purchase cost with 800 ft2 W1980 = 100,000 lb i200, 000-1,000,000 = 0.93
SOLUTION: C1980 = $390,000
For 700 ft2 REQUIRED:
0.81 C in $ for 700,000 lb
 700 
C1985 = $13,503.00  
 600 
SOLUTION:
0.60 0.93
 200,000   700,000 
C1985 = $15,298.79 C = $390,000    
 1,000,000   200,000 
C = $1,900,000
For 800 ft2
0.81 Present Cost
 800 
C1985 = $15,298.79  
using table 3, page 163 (Cost indexes as annual average)
 700 
where: 1980 = 560, and 1985 = 904
 904 
C1985 = $17,046.32 C1990 = $1,900,000  
 560 
5. Refer to problem no. 3. What will be the purchased cost of the heat exchanger with 1500 ft2 of C1990 = $3,060,000
heating surface in 1985?
GIVEN:
A = 100 to 2,000 ft2 7. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel processing
Present year = 1980 plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. The major part
P1980 = $3,000 of the building cost will be for indoor construction, and the contractor’s fee will be 7% of the direct
REQUIRED: plant cost. All other costs are close to the average values found for typical chemical plants. On the
1985 purchase cost with 1500 ft2 basis of this information, estimate the total direct plant cost.
SOLUTION: GIVEN:
For 800 ft2 Equipment Cost = $300,000
Contractor’s Fee = 7% of the direct plant cost
Unit Operations Economics
REQUIRED:
Total direct plant cost Fixed Capital Investment = $1, 246, 530
SOLUTION: 9. Refer to the previous problem and on the basis of this information, what is the total capital
Purchased Equipment 100% ($300,000)= $300,000 investment?
Purchased Installation 39% ($300,000) = GIVEN:
$117,000 Equipment Cost = $300,000
Instrumentation 13% ($300,000) = Contractor’s Fee = 7% of the direct plant cost
$39,000 Fixed capital investment = $1, 246, 530
Piping 31% ($300,000) = REQUIRED:
$93,000 Total capital investment
Electrical 10% ($300,000) = $30,000 SOLUTION:
Building 29% ($300,000) = $87,000 Fixed Capital Investment $1, 246, 530
Yard Improvements 10% ($300,000) = $30,000 Working Capital 74% ($300,000) =
Service Facilities 55% ($300,000) = $165,000 $222,000
Land 6% ($300,000) =
$18,000
Total Capital Investment = $1, 468, 530
Total Direct Plant Cost = $879,000
10. The total capital investment for a chemical plant is $1,500,000 and the plant process 3M kg of
8. The purchased equipment cost for a plant which produces pentaerythritol (solid-fuel processing product annually. The selling price of the product is $0.82/kg. Working capital amounts to 15% of
plant) is $300,000. The plant is to be an addition to an existing formaldehyde plant. The major part the total capital investment. The investment is from company funds, and no interest is charged.
of the building cost will be for indoor construction, and the contractor’s fee will be 7% of the direct Raw-material costs for the product are $0.09/kg, labor $0.08/kg, utilities $0.05/kg, and packaging
plant cost. All other costs are close to the average values found for typical chemical plants. On the $0.008/kg. Distribution costs are 5% of the total product cost. Determine the percent change in
basis of this information, estimate the fixed capital investment. total cost.
GIVEN: GIVEN:
Equipment Cost = $300,000 Total Capital Investment $1,500,000
Contractor’s Fee = 7% of the direct plant cost Product 3,000,000 kg annually
REQUIRED: Selling Price $0.82/kg
Fixed capital investment Working Capital 15% of the total capital
Raw Materials Cost $0.09/kg
Labor $0.08/kg
SOLUTION: Utilities $0.05/kg
Purchased Equipment 100% ($300,000)= $300,000 Packaging $0.008/kg
Purchased Installation 39% ($300,000) = Distribution Cost 5% of total capital cost
$117,000 REQUIRED: % change in total cost
Instrumentation 13% ($300,000) =
$39,000 SOLUTION:
Piping 31% ($300,000) = TPC = FC + WC +VO
$93,000 TPC = 0.35 + 0.040 + 0.25
Electrical 10% ($300,000) = $30,000
Building 29% ($300,000) = $87,000 TPC = 1or 100%
Yard Improvements 10% ($300,000) = $30,000 1.5
Service Facilities 55% ($300,000) = $165,000 x  500,000 
Land 6% ($300,000) = by ratio and proportion = 
$18,000 25  1,000,000 
x = 8.84%
Engineering and Supervision 32% ($300,000) = $96,000
Construction Expense 34% ($300,000) = after producing only 500,000 kg of product
$102,000 TPC = 0.35 + 0.20 + 0.084 = 0.6384
$198,000
Constructor’s Fee 7% ($879,000) = $61,530 % change = 100 - 63.84
Contingencies 36% ($879,000) =
$108,000 % change = 36.16%

$169,530
Unit Operations Economics
11. It is desired to have a $ 9000 available from 12 years from now. If $ 5000 is available for 14. An annuity is due to being used to accumulate money. Interest is compounded at an effective
investment at the present time, what is discrete annual rate of compound interest on the annual rate of 8 %, and $1000 is deposited at the beginning of each year. What will be the total
investment would be necessary to give the desired amount? amount of annuity due be after 5 years?
GIVEN: GIVEN:
S = $ 9000 R = $1000
P = $ 5000 N = 5 yrs. I=8%
n = 12 REQUIRED: S5
REQUIRED: Interest, i SOLUTION:
SOLUTION: If no interest: S5 = R [ ( 1+ i) n – 1]/i
S = P (1 + i )n S5= $5000
$9000 = $5000(1 + i) 12 But with interest:
S5 = 1000[(1 + 0.08) 5-1]/0.08
i = 0.05 or 5.02 %
S5 = $ 5866.6009
12. An original loan of $2000 was made at 6 percent simple interest per year for 4 years. At the Per year: S = $5866.6009/5 = $ 1173.32
end of this time, no interest had been paid and the loan was extended for 6 more years at a new,
effective, compound-interest rate of 8 percent per year. What is the total amount owned at the end
of ten years if no intermediate payments are made? 15. For the total year payments of $5000 for ten years, what will be the compound amount
GIVEN: P = $2000 accumulated at the end of ten years if the payment is at the end of the year? The effective (annual)
i = 6% interest is 20% and payments are uniform.
n = 4 years GIVEN:
REQUIRED: SC R = $5000
SOLUTION: 20% annual interest
SS = P (1 + in) REQUIRED:
= 2000 [1 + 0.06(4)] S at the end of the year
SS = $2480 SOLUTION:
Extended for 6 years S = R [(1+ i) n – 1]/i
SC = $2480 (1 + 0.08)6 S = $5000[(1 +0.2) 10-1]/0.2
S = $ 129793.41
SC = $ 3,935.45

16. Referring to the previous problem, estimate the compound amount accumulated at the end of
ten years, if the payment is made weekly?
13. The original cost for a distillation tower is $24,000 and the useful life of the tower is estimated
GIVEN:
to be 8 years. The sinking fund method for determining the arte of depreciation is used, and the
R = $5000
effective annual interest for the depreciation fund is 6 percent. If the scrap value of the distillation
20% annual interest
tower is $ 4000, determine the asset value at the end of 5 years.
REQUIRED:
GIVEN: n = 8 years
S at the end of the year
V = $ 24,000
VS = $4000
REQUIRED: R
SOLUTION:

For weekly i ≠ 0.2


For new ieff = [1+ r/m) m-1
SOLUTION:
Ieff = [1 + 0.2/52) -1 = 0.2209
i Solving for S,
R  (V  VS ) S = R[1+ ieff) – 1]/ieff
(1  i)n  1
S = $5000 [1.02209) 10-1]/0.2209
S = $ 143951.4873
0.06
R  (24000  4000)
(1  0.6)5  1 17. A multiple – effect evaporator is to be used for evaporating 400,000 lb of water per day from a
salt solution. The total initial cost for the 1st effect is $18,000 and each additional effect costs
R = $ 3,547.928 $15,000. The life period is estimated to be 10 years, and the scrap value at the end of the life
period may be assumed to be zero. The straight-line depreciation method is used. Fixed charges
minus depreciation are 15% yearly based on the first cost of the equipment. Steam cost $1.50 per
Unit Operations Economics
1000 lb. Annual maintenance charges are 5% of the initial equipment cost. All other cost is Use total effect = 3
independent of the number of effects. The unit will operate 300 days per year. If the lb of water
evaporated per pound of steam equals 0.85 x numbers of effects, determine the optimum number 18. Determine the optimum economic thickness of insulation that should be used under the
of effects for minimum annual cost. following conditions: Standard steam is being passed continuously through a steel pipe with an
GIVEN: outside diameter of 10.75 in. The temperature of the steam is 400F, and the steam is valued at
Initial cost = $18000 $1.80 per 1000 lb. The pipe is to be insulated with material that has a thermal conductivity of 0.03
Lb of water = 400000 lb Btu/h-ft2-F/ft. The cost of installed insulation per foot of pipe length is $4.5xIt, where It is the
Cost of additional effect = $15000 thickness of the insulation in inches. Annual fixed charges including maintenance amount to 20%
Life period = 10 of the initial installed cost. The total length of the pipe is 1000 ft, and the average temperature of
Salvage value = 0 the surrounding may be taken as 70F. Heat transfer resistance due to the steam film, scale and
Fixed charges = 15% of first cost pipe wall are negligible. The air –film coefficient at the outside of the insulation may be assumed
Steam cost = $1.50/1000 lb
Maintenance charges = 5% of first cost
Operation = 300 days/year
Lb of steam/lb water = 0.85 x no. of effects
REQUIRED:
Optimum number of effects for minimum annual cost constant at 2.0 Btu/h-ft2-F for all insulation thickness.
GIVEN:
SOLUTION: Steam
Let x = additional no. of effects 400F do = 10.75 in
Cost of equipment = 18000 + 15000x
FC = 0.15 (18000 +15000x) Do (with insulation) = 10.75 + 2 It
= 2700 + 2250 x Cost of steam = $1.80/1000lb
Thermal conductivity = 0.03 Btu/h-ft2-F/ft
Annual maintenance = 0.05(18000+15000x) Cost of insulation/ft = $4.5 It
= 900 + 750x Annual fixed charges + maintenance = 20% of Initial cost
Length = 1000 ft
T surrounding = 70F
Depreciation/yr = (18000+15000x)/10 h = 2 btu/h-ft2F
d = 1800 + 1500x REQUIRED:
Optimum economic thickness insulation
lb of steam = 400000lbH2O/day (300 days/yr)
0.85(x+1) SOLUTION:
= 1.41176 x 108 Cost of insulation = (4.5 It) (1000 ft ) = 4500 It
(x+1)

Steam cost / yr = 1.50 1.41176x10 8  FC = 0.20 (4500 It)


 
1000 
FC = 500 It
x 1 
= 70,588.23 / (x+1) cost of steam = m = UAo∆T
∆T = 400 – 70 =330F
Total Cost per year = CT = FC + Steam cost + depreciation + maintenance cost  = 826 btu/lb
A = DoL =
10.75  2I t (1000)
CT = (2700 + 2250x) + (1800+1500x) + (900+750x) + (70588.23/x+1)
CT = 5400 + 4500x + 70588/(x+1)2 12
dC T 70588
 4500 
dx (x  1) 2
0 = 4500(x2+2x+1) – 70588
0 = 4500x2 + 9000x – 66088

Using quadratic equation:

x=  9000  90002 44500 66088


2(4500)
x = 2.96
Unit Operations Economics
1 x = 10 M + 0.25x
Uo  x = TCI = $13.33M
1 x w Do

ho kDln ROR = $3M
x100
Do  do $13.33M
Dln 
2 ROR = 22.5%

Dln 
10.75  2I t   (10.75)
 10.75  I t
2 20. If a plant will require a fixed capital investment of $10 million and the working capital will
amount to 25% of the total investment and annual depreciation costs are estimated to be 10
1
Uo  percent of the fixed capital investment. If the annual profit will be $3 million, what is the minimum
1  I t (10.75  2I t ) payout period (POP)?
2 0.03(10.75  I t )(12) GIVEN:
FCI = $10 M
Working capital = 25% TCI
of steam= Annual depreciation costs = 10% FCI
dTAC Annual profit = $3 M
 900I t 458.8(10.75  2It)
dI t REQUIRED:
minimum payout period
SOLUTION:
  depreciabl eFCI
 1  POP =
  profit dep' n
 1  I t (10.75  2I t )  
 2 0.03(10.75  I t )(12)  yr yr
TAC = 900 I t  2.31 ( 10.75 I t )(10.75  2I t ) = 10M
(10.75 I t )(2I t ) 2  0.935 $3M
 0.1($10M)
0 = 900 I t  2.31 ( 10.75 I t )(10.75  2I t ) yr
(10.75 I t )(2I t ) 2  0.935 POP = 2.5 years
It = 1 TAC = $3228 21. An annual investigation of a proposed investment has been made. The following result has
= 1.5 TAC = $3054 been presented to management. The minimum payout period based on capital recovery using a
minimum annual return of 10 percent as a fictitious expense is 10 years; annual depreciation costs
It = 1.4 TAC = $3057
amount top 8 percent of the total investment. Using this information, determine the standard rate of
return on the investment.
19. A proposed chemical plant will require a fixed capital investment of $10 million. It is estimated GIVEN
that the working capital will amount to 25% of the total investment and annual depreciation costs Payout period = 10 years
are estimated to be 10 percent of the fixed capital investment. If the annual profit will be $3 million, Minimum annual return = 0.10 of fictitious expense
determine the standard percent return on the total investment
Annual depreciation cost = 8% TCI
REQUIRED
Standard rate of return
GIVEN:
SOLUTION
FCI = $10 M
Working capital = 25% TCI Payout period = FCI
Annual depreciation costs = 10% FCI averagepro fit avedep' n
Annual profit = $3 M 
REQUIRED: yr yr
% return on investment (ROR) Ave. profit = annual profit – expenses
SOLUTION: = x – 0.10TCI
annualprof it
ROR = 10 = 0.85TCI
TCI (x  0.10TCI)  0.8TCI
But TCI = FCI + WC
x = 0.105 TCI
Let x = TCI
Unit Operations Economics
For problems 24- 26.On Aug. 1, a concern had 10,000 lb of raw material on hand, which was
%rate of return = annualprof it x10 0
purchased at a cost of $0.030 per pound. In order to build up the reserve, 8000 lb of additional raw
TCI material was purchased on Aug. 15 at a cost of $0.028 per pound. If none of the raw material was
ROR = 10.50% used until after the last purchase.

24. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
22. The information given in the previous problem, applies to conditions before income taxes. If account for the month of August by current average method.
34% percent of all profits must be paid out for income taxes, determine the standard rate of return SOLUTION:
after taxes using the figures given in the previous problem. Ave = $ (0.030 + 0.028 + 0.031) / 3
GIVEN:
Payout period = 10 years Ave = $ 0.0297/ lb
Minimum annual return = 0.10 of fictitious expense
Annual depreciation cost = 8% TCI 25. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
34% of all profits must be paid out for income taxes account for the month of August by “FiFo” method.
REQUIRED SOLUTION:
Standard rate of return after taxes 10,000 lb = $ 0.030
SOLUTION:
Profit = 0.105TCI (before taxes) other 2000 lb cost = $ 0.028/lb
Profit = 0.105TCI – 0.34(0.105TCI) (after taxes) 26. Determine the total cost of 12,000 lb of the raw material on an inventory or cost-of-sales
Profit = 0.0693TCI account for the month of August by lifo method.
ROR = annualprof it x10 0 ANSWER: recent price = $ 0.031/lb
TCI
= 0.0693TCI x100 For question nos. 27 – 31.
TCI The following are the data gathered from the AMD Food Corporation:
ROR = 6.93% Cash $20,000

23. A capitalized cost for a piece of equipment has been found to be $55,000. This cost is based Accounts payable:
on the original cost plus the present value of an indefinite number of renewals. An annual interest B Company 2,000
rate of 12% was used in determining the capitalized cost. The salvage value of the equipment at C Company 8,000
the end of the service life was estimated to be 10 years. Under these conditions, what would be the
original cost of the equipment? Accounts receivable 6,000
GIVEN: Inventories 15,000
k = $55,000 i = 12% Mortgage payable 5,000
Vs = 0 n = 10 yrs. Common stock sold 50,000
REQUIRED: Cv Machinery and equipment (at present value) 18,000
SOLUTION Furniture and fixtures (at present value) 5,000
Government bonds 3,000
k = C R (1  i)  V
n
Surplus 2,000
(1  i)  1
n s

Vs = 0 27. From the data given above, determine the total asset of the AMD Food Corporation.
55 000 = CR (1  0.12)
10 ANSWER:
BALANCE SHEET
(1  0.12)101 ASSETS EQUITIES
CR = $37 291.47 Current Assets Current Liabilities
CR
k= Cv  Cash $ 20,000 Accounts Payable
(1  i) n  1 Accounts Receivable 6,000 MC Company $ 2,000

Cv = 55 000- 37291.47
Inventories 15,000 MD Company 8,000
(1  0.12)10  1
Cv =$37 291.47
Government Bonds 3,000 Mortgage Payable 5,000
Total $ 44,000 Total $ 15,000
Unit Operations Economics
Fixed Assets Stockholder’s Equity Rent
400
Machinery & Equipment 18,000 Common Stocks Sold 50,000 Other Expenses
Furniture & Fixtures 5,000 Total $ 50,000 1,200
Total $ 23,000 Surplus 2,000 Net Income $
19,200
Total $ 2,000
Total Assets $ 67,000 Total Equities $ 67,000
32. From the data above, determine also the total gross income of the AC Antifreeze Company.
ANSWER:
Total Assets: $ 67, 000 From the income statement;
Gross Income = $36,100
28. Determine the total current assets of the AMD Food Corporation. The following information applies to MADSteel Company on a given date:
ANSWER: From the balance sheet;
Total Current Asset = $ 44,000
Long-term debts $ 1,600
29. What is the total amount of the Current liabilities of the AMD Corporation? Debts due within 1 year 1,000
ANSWER: From the balance sheet; Accounts payable 2,300
Total Current Liabilities = $ 15,000 Machinery and equipment (at cost) 10,000
30. What is the total amount of the Fixed Assets of the AMD Food Corporation? Cash in bank 3,100
ANSWER: From the balance sheet; Prepaid rent 300
Total Fixed Assets = $ 23,000 Government bonds 3,000
Social security taxes payable 240
Reserve for depreciation 600
During the month of October, the following information was obtained in the AC antifreeze retailing Reserve for expansion 1,200
company: Inventory 1,600
Accounts receivable 1,700
Salaries $ 3,000
Delivery expenses 700
Rent 400
Sales 15,100
Antifreeze available for sale during October (at cost) 20,000
Antifreeze inventory on Oct. 31 (at cost) 11,000
Other expenses 1,200
Earned surplus before income taxes as of Sept.30 800 33. Determine the cash asset for the MADSteel Company at the given date.

31. Prepare an income statement for the month of October to determine the net income is for the ANSWER: Cash Asset = $6,100
month of October.
ANSWER:
AC Antifreeze Retailing Company Cash Assets
Income Statement Cash in Bank $ 3,100
As of October Government Bonds 3,000
Income Total 6,100
Sales $ Current Assets
15,100 Accounts Receivable 1,700
Antifreeze available for sale 20,200 Cash in Bank
Earned Surplus before income 3,100
800 Government Bonds 3,000
Total Gross Income 36,100 Inventory 1,600
Deductions Prepaid Rent
Antifreeze inventory on Oct.31 11,600 300
Salaries
3,000
Delivery 700
Total
9,700
Unit Operations Economics
Total expenses annually exc. Depreciation = $ 100,000
i = 0.12
Long-term Debts 1,600 REQUIRED: n using SLM
Current Liabilities SOLUTION:
Departments due within 1 year Vo  Vs
d=
1,000 n
Accounts Payable 2,300
Social Security Taxes payable 240 x = total annual expenses inc dep’n/yr
Total
x = 100,000 + 0.12x
5,140
x = $ 13,636.36 = d

60,000  10,000
13,636.36 =
34. Determine the current asset for MADSteel Company n
n = 3.67
ANSWER: Current Asset = $9, 700 n = 4 years
39. The initial installed cost for a new piece of equipment is $10,000, and its scrap value at the end
35. Determine the current liabilities of MADSteel Company of its useful life is estimated to be $2,000. The useful life is estimated to be 10 years. After the
equipment has been in use for 4 years, it is sold for $7,000. The company which originally owned
ANSWER: Current Liabilities= $3, 540 the equipment employs the straight-line method for determining depreciation costs. If the company
had used an alternative method for determining depreciation cost, the asset (or book) value for the
piece of equipment at the end of 4 years would have been $5240. The total income-tax rate for the
36. Determine the Quick ratio for MADSteel Company company is 34% of all gross earnings. Capital-gains taxes amount to 34% of the gain. How much
net saving after taxes would the company have achieved by using the alternative (in this case,
SOLUTION: Quick Ratio = Current assets – Inventory reducing-balance) depreciation method instead of the straight-line depreciation method? GIVEN:
Vo = $10,000
Current liabilities Vs = $2,000
V4 DBM = $5,240
= $9,700– $1, 600 n = 10 years
$3, 540 V4 SLM = $7,000
Tax = 0.34
Quick Ratio = 2.29 REQUIRED: Net saving after taxes
SOLUTION:
37. Determine the current ratio of MADSteel Company SLM:
$7,000 – 7,000 (0.34) = $4,620
SOLUTION: Current ratio = current assets DDB:
$5,240 – 5,240 (0.34) = $3,458.40
Current liabilities Net saving after taxes = $4,620 - $3,458.40 = $1161.60

= $9, 700 40. A piece of equipment is originally costing $40,000 was put into use 12 years ago. At the time
the equipment was put into use, the service life was estimated to be 20 years and the salvage and
$3, 540 scrap value at the end of the service life were assumed to be zero. On this basis, the straight-line
depreciation fund was set up. The equipment can now be sold for $10,000, and a more advanced
Current ratio = 2.74 model can be installed for $55,000. Assuming the depreciation fund is available for use, how much
new capital must be supplied to make the purchase?
GIVEN:
38. A reactor of special design is the major item of equipment in a small chemical plant. The initial Vo = $40,000
cost of a completely installed reactor is $60,000, and the salvage value at the end of the useful life Vs = 0
is estimated to be $10,000. Excluding depreciation costs for the reactor, the total annual expenses a = 12
for the plant are $100,000. How many years of useful life should be estimated for the reactor if 12 n = 20
% of the total annual expenses for the plant are due to the cost for the reactor depreciation? The REQUIRED: New Capital needed
straight-line method for determining depreciation should be used. SOLUTION:
GIVEN: Vo  Vs
Vo = $60,000 d=
Vs = $10,000 n
Unit Operations Economics
40,000  0 da = $ 3,276.80
d=
20 43. The depreciation charge for the fifth year if sum-of-the-years-digits depreciation is used.
GIVEN:
$2,000 Vo = $40,000
d=
yr Vs = 0
Va = Vo – ad n = 10
REQUIRED: da & % paid off
Va = 40,000 - 8 ( 2000 ) SOLUTION:
Va = $24,000 SYDM
New Capital = 55,000 – (24,000 + 10,000)



10  5  1 
da = 2 ( 40,000)
New Capital = $21,000 10 10  1 
da = $ 4,363.64
41. The original investment for an asset was $10,000, and the asset was assumed to have a
service life of 12 years with $2,000 salvage value at the end of the service life. After the asset has 44. The percent of the original investment paid off in the first half of the service life using the
been in use for 5 years, the remaining service life and the final salvage value are reestimated at 10 double-declining balance method.
years and $ 1,000, respectively. Under these conditions, what is the depreciation cost during the GIVEN:
sixth year of the total life is straight-line depreciation is used? Vo = $40,000
GIVEN: Vs = 0
Vo = $10,000 n = 10
Vs = $2,000 REQUIRED: da & % paid off
a=5 SOLUTION:
n = 12 5
REQUIRED: d during the sixth day V 5 = 40,000  1  2  = $13,107.20
SOLUTION:
 10 
Vo  Vs
d= 13,107 .2
n % paid off = = 32.768%
40,000
10,000  2,000
d= % = 32.8
12
$666 .67 45. The percent of the original investment paid off in the first half of the service life using the sum-
d=
yr of-the-years-digits method.
GIVEN:
Va = Vo – ad
V 5 = 10,000 - 5 (666.67) = $6666.65
After 5 years of use:
6666 .65  1,000
da =
10
da = $566.65/yr

A piece of equipment having a negligible salvage and scrap value is estimated to have a service
life of 10 years. The original cost of the equipment was $40,000. Determine the following:
42. Based on the above data, determine the depreciation charge for the fifth year if double-
declining balance depreciation is used.
GIVEN:
Vo = $40,000
Vs = 0
n = 10
REQUIRED: da & % paid off
Solution:
da = 40,000 ( 1-2/10)5-1 2/10
Unit Operations Economics
Vo = $40,000 SOLUTION:
Vs = 0 Using SYDM:
n = 10 da = 2 ( 850,000 –50,000 ) = $ 76,190.48
REQUIRED: da & % paid off Gross Earnings = Total income – total expense
GE = $ 1,000,000 – ( $600,000 + 76,190.48 ) = $ 323,809.52
SOLUTION:
SYDM Net Profit = $ 323,809.52 (1 - 0.45) = $ 178,095.24
V1 = 40,000 – 4,363.64 = $ 35,636.36 Income tax = 0.45 (323,809.52) = $ 145,714.28
V2 = 35,636.36 - 4,363.64 = $ 31,272.72 Using SLM:
V3 = 31,272.72 - 4,363.64 = $ 26,909.08 Vo  Vs
d=
V4 = 26,909.08 - 4,363.64 = $ 22,545.94 n
V5 = 22,545.94 - 4,363.64 = $ 18,181.8
850 ,000  50,000
d=
18,181 .80 20
% paid off = = 45.45%
40,000 $40 ,000
d=
% = 45.45 yr
Basis: 1 yr
46. The original cost of the property is $30,000, and it is depreciated by a 6 percent sinking-fund
method. What is the annual depreciation charge if the book value of the property after 10 years is GE = $ 1,000,000 – (600,000 + 40,000) = $ 360,000
the same as if it had depreciated at $2,500/year by the straight-line method? Net Profit = $ 360,000 (1 - 0.45) = $ 198,000
GIVEN:
Vo = $30,000 Income Tax = 0.45 ($ 360,000) = $ 162,000
i = 0.06
Reduction in net profit = $198,000 - $178,095.24 = $19,904.76
n = 10 years
REQUIRED: Reduction in income tax = $162,000 - $ 145.714.28 = $16,285.72
da = $2,500/yr
da using SFM if Va SLM = Va SFM Reduction in income tax = $16,285.72
SOLUTION:
Using SLM: 48. The total value of anew plant is $2 million. A certificate of necessity has been obtained
Va = 30,000 – 10 (2,500) permitting a write-off of 60 percent of the initial value ay 5 years. The balance of the plant requires
Va = $ 5,000 a write-off period of 15 years. Using the straight-line method and assuming negligible salvage and
scrap value, determine the total depreciation cost during the first year.
Using SFM: GIVEN:
30,000 –5,000 = R (1+ 0.06)10 - 1 / (0.06) Vo = $2,000,000
R = $ 1,896.70 / 10 yr Vs = 0
da = $ 189.67/yr n = 15
a=5
47. A concern has a total income of $1 million/year, and all expenses except depreciation amount Vs = negligible
to $600,000/year. At the start of the first year of the concern’s operation, a composite account of all REQUIRED: d after 1 year
depreciable items show a value of $850,000, and the overall service life is estimated to be 20 SOLUTION:
years. The total salvage value at the end of the service life is estimated to be $50,000. Thirty Vo new = 2,000,000 – 2,000,000 ( 0.6) = $ 800,000
percent of all profits before taxed must be paid out as income taxes. What would be the reduction Vo  Vs
d=
in income-tax charges for the first year of operation if the sum-of-the-years-digits methods were n
used for depreciation accounting instead of the straight-line method?
GIVEN: 80,000  0
d=
Total income = $ 1 million/yr 15
Annual expenses exc dep’n = $600,000
For the 1st yr of operation: d = $ 53, 333. 33/ yr
y = $ 850,000
n = 20 yr
Vs = $ 50,000 50. A profit-producing property has an initial value of $50,000, a service life of 10 years, and zero
Income tax rate = 0.45 salvage and scraps value. By how much would annual profits before taxes be increased if a 5
percent sinking-fund method were used to determine depreciation costs instead of straight-line
REQUIRED: method?
Reduction in income taxes if SYDM is used instead SLM GIVEN:
Unit Operations Economics
Vo = $50,000,000 Vo = $20,000
Vs = 0 Vs = $5,000
n = 10 n=5
REQUIRED: Annual profits increase REQUIRED: da & Va
SOLUTION: SOLUTION:
  5 SLM
 1
 0.05    1

Using SFM: Va = 50,000 - (50,000-0)  
 !0 Vo  Vs
 1 0.05   d=
  1 n
Va = $28034.35
Using SLM 20,000  5,000
d= = $ 3,000
Vo  Vs 5
d=
n Va1 = Vo – ad = $17,000
d = $ 25,000 Va2 = $14,000
inc = $28034.3 - $25,000
Va3 = $11,000
inc = $ 3.034.35
Va4 = $ 8,000
51. In order to make it worthwhile to purchase a new piece of equipment, the annual depreciation Va5 = $ 5,000
costs for the equipment cannot exceed $3,000 at any time. The original cost of the equipment is
$30,000, and it has a zero salvage and scrap value. Determine the length of service life necessary 54. By using Sum-of-digits depreciation
if the equipment is depreciated by the sum=of-the-years-digits method by the straight-line method. GIVEN:
GIVEN: Vo = $20,000
da = $ 3,000 Vo = $30,000 Vs = 0 Vs = $5,000
REQUIRED: n n=5
SOLUTION: REQUIRED: da & Va
Using SYDM: a=1 SOLUTION:
da = 2 ( n-1+1)/ n (n+1) x ( Vo –Vs )
3000n2 + 3000 n = 60000n n
d= (Vo-Vs)
n = 19 years
nt
52. Referring to the previous number, determine the length of service life necessary if the nt = 15
equipment is depreciated by the straight-line method.
GIVEN: 5
da = $ 3,000 Vo = $30,000 Vs = 0 d1 = 15  (20,000-5,000) = $ 5.000
REQUIRED: n  
d2 = $ 4,000
SOLUTION: d3 = $ 3,000
Using SLM: a=1 d4 = $ 2,000
Vo  Vs d5 = $ 1,000
d=
n Va1 = Vo – d = $ 15,000
Va2 = $ 11,000
3000 = 30000n Va3 = $ 8,000
n= 10 years Va4 = $ 6,000
Va5 = $ 5,000
A materials-testing machine was purchased for $20,000 and was to be used for 5 years with an
expected residual salvage value of $5,000. Graph the annual depreciation charges and year-end 55. By using Double-declining balance depreciation
book values obtained by using: GIVEN:

53. By using Straight-line depreciation


GIVEN:
Unit Operations Economics
Vo = $20,000 A broadcasting corporation purchased equipment for P53, 000 and paid P1, 5000 for freight and
Vs = $5,000 delivery charges top the job sites. The equipment has a normal life of 10 year with a trade-in value
n=5 of P5, 000 against the purchase of anew equipment at the end of the life.
REQUIRED: da & Va 58. referring to the problem above, determine the annual depreciation by straight-line method.
SOLUTION: GIVEN:
DDBM Co = P53, 000 + 1,500 = 54,500
Vs  = 2  5,000  = 0.5
f = 2
CL = P5, 000 L = 10
  20,000  REQUIRED: da using SLM
Vo    SOLUTION:
CO  C L
a 1 d=
Va 1 =

 Vo 1  f



 = 20,000

 1  0.5 
 = $ 10,000 L
    
Va2 = $ 5,000 54,500  5,000
d=
Va3 = $ 2,500 10
Va4 = $ 1,250
d = P4, 950
Va5 = $ 625
59. From the preceding number, determine annual depreciation by sinking fund method. Assuming
interest 6 ½% compounded annually.
56. An asset with an original cost of $10,000 and no salvage value has a depreciation charge of
GIVEN:
$2381 during its second year of service when depreciated by the sum-of-digits method. What is its
Co = P53,000 + 1,500 = 54,500
expected useful life?
CL = P5, 000 L = 10
GIVEN:
REQUIRED: da using SFM
Vo = 120,000
SOLUTION:
Vs = 0
a=2 d= CO  CL = 54,500  5,000 =
P49 ,500
da = $2381/yr F 13.3846
F
REQUIRED: n , 6.5% , 10
SOLUTION: n = 2(n-a+1)/(n (n+1) x ( Vo-Vs) A A,6.5% ,10
2381n2 + 2381n = 2n –2 (10,000) d= P 3,668
2381 n2 - 17619n + 20,000 = 0 A firm brought equipment for P56, 000. Other expenses including installation amounted to P4, 000.
By quadratic formula: n = 5.9998 The equipment is expected to have a life of 16 years with a salvage value of 10% of the original
n = 6 years cost.
57. An electronic balance costs P90, 000 and has an estimated salvage value of P8, 000 at the 60. Determine the book value at the end of 12 years by SLM:
end of its 10 years lifetime. What would be the book value after 3 years, using straight-line method GIVEN:
in solving for the depreciation? Co = P56,000 + 4,000 = P60,000
GIVEN: CL = 0.1 Co
Co = P90, 000 L = 10
CL = P8, 000 i = 0.12
L = 10 REQUIRED: C12 using SLM
n=3 SOLUTION:
REQUIRED: d using SLM CO  C L
SOLUTION: d=
CO  C L L
d=
L d12 = P3, 375 (12) = P 40,500
90,000  8,000 C12 = Co - d12 = 60,000 – 40,500
d= = P 8,200
10 C12= P19, 500
D3 = n(d) = 3(8,200) = P24,600
61. Determine the book value at the end of 12 years by SFM:
C3 = CO - D3 = 90,000 - 24,000 GIVEN:
Co = P56, 000 + 4,000 = P60, 000 CL = 0.1 Co
C3 = P 65,200 L = 10
i = 0.12
REQUIRED: C12 using SFM
SOLUTION:
Unit Operations Economics
CO  C L 60,000  6,000 P54 ,000 Co = P15, 000
d= = = = P 1,263 CL = P2, 000
F F 42.7533 REQUIRED: d8 & V8
, 12% , 16 SOLUTION:
A A,6.5% ,10
 CL  =  2,000 
D 12 = d  F 12% , 16   10
15,000  = 0.1825 or 18.25%
A,
1263 (24.1331) k=1- L
C 
   O  
d12 = P30, 480 C9 = Co (1 – k) 8 = P 2,992
D8 = Co - C8 = 15,000 – 2,992
C12 = Co - d12 = 60,000 – 30,480 D8 = P 12,008
66. Determine the rate of depreciation, the total depreciation up to the end of 8th year and book
C12= P29, 520
value at the end of 8 years for an asset that costs P15, 000 new and has an estimated scrap value
of P2, 000 at the end of 10 years by DDBM.
For numbers 62 – 64. A certain type of machine losses 10% of its value each year. The machine
GIVEN:
cost P2, 000 originally. Make cut a schedule showing the following:
Co = P15, 000
62. By yearly depreciation
CL = P2, 000
REQUIRED: d8 & V8
GIVEN:
SOLUTION:
Co = P2, 000
dep’n = 10% 2 2
REQUIRED: C5 dR = = = 0.2 or 20 %
SOLUTION: L 10
Year Book value at Dep’n (10%) Total dep’n Book 8 8
value  2  2
the beginning at the end
C8 = co  1  L  = 15,000  1  10  = P2, 517
   
1 P 2,000 P 200 P 200 D9 = Co - C8 = 15,000 – 2,517
P 1,800 D9 = P 12,483
2 1,800 180 380
1,620 67. Mr. Dim bought a calciner for P220, 000 and used it for 10 years, the life span of the
3 1,620 162 542 equipment. What is the book value of the calciner after 5 years of use? Assume a scrap value of
1,458 P20, 000 for SLM;
4 1,458 145.8 687.8 GIVEN:
1,312 Co = P220, 000
L = 10
5 1,312.20 131.22 819.12 1,180.98 n=5
REQUIRED: D5 & C5
63. The total depreciation after 5 years. SOLUTION:
GIVEN: SLM
Co = P2, 000 dep’n=10%REQUIRED: C5 n Co  CL
ANSWER: P819.12 D5 =  
5220,000  20,000 
= = P100, 000
L 10
C5 = Co – D5 = 220,000 – 100,000 = P 120,000
64. Estimate the book value at the end year for 5 years. C5 = P 120,000
Answer from the above table: P1, 180.98
65. Determine the rate of depreciation, the total depreciation up to the end of 8th year and book 68. Refer to the previous problem. What is the book value of the calciner after 5 years of use?
value at the end of 8 years for an asset that costs P15,000 new and has an estimated scrap value Assume a scrap value of P22, 000 for textbook for DBM.
of P2,000 at the end of 10 years by DBM. GIVEN:
GIVEN:
Co = P220, 000
L = 10
n=5
REQUIRED: D5 & C5
SOLUTION:
Unit Operations Economics
n n = 12
  CL  L REQUIRED: present cost of warehouse 1
Cs=  Co  = (220 ,000 ( 22,000 /220 ,000 )^(5/10)= P 69,570 SOLUTION:
Co
P = S/ (1+i) n
 = 15, 000 x 0.444 = $6660
Cs = P 69, 570.00
the present cost of type 1 is seen to be 24, 000 + 6660 = $30, 660. Since this is smaller than the
69. Refer to the previous problem. What is the book value of the calciner after 5 years of use? type 2 building, it is more economical to build
Assume a scrap value of P20, 000 for textbook for DDBM.
GIVEN: 73. Determine the equal (year-end) payments that will be available for the next four years if we
Co = P220, 000 invest $4, 000 at 6%.
L = 10 SOLUTION:
n=5 R = $4, 000 0.06 (1 + 0.06) 4
REQUIRED: D5 & C5 = $4, 000 (0.28859)
SOLUTION: (1 + 0.06) 4 - 1
5 5
C5 = Co  1  2    2 
= P220 ,000  1 
10 
R = $1154.36
 L  
Cs = P 72, 090 74. A new snow removal machine costs $50, 000. The new machine will operate at a reputed
savings of $400 per day over the present equipment in terms of time and efficiency. If interest is at
70. A structure costs P12, 000 new. It is estimated to have a life of 5 years with a salvage value at 5% and the machine’s life is assumed to be 10 years with zero salvage, how many days per year
must the machine be used to make the investment economical?
the end of life of P1, 000. Determine the book value at the end of three years.
SOLUTION:
GIVEN:
Co= P12, 000 CL =P1, 000 L=5 Assume straight-line depreciation and no salvage value.
REQUIRED: Va Annual depreciation = 50, 000 – 0 = $5, 000
SOLUTION: 10
Co - Cl = 12,000 - 1,000 = P 11,000
Average annual unearned interest = ½ [50, 000 x 0.05 + 50, 000 (0.05)] = $1375
10
Year Year in reverse order Dep’n during the year Book value
Annual cost = $6375
1 5 5/15 (11,000) = 3,664 P 8,333
To invest in the machine, the yearly savings must at least be equal to $6375. The number of days
2 4 4/15 (11,000) = 2,933 5,400
3 3 15 (11,000) = 2,200 3,200 m the machine must be used is therefore
4 2 2/15 (11,000) = 1,467 1,733
m = 6375 / 400 = 15.9 or 16 days
5 1 1/15 (11,000) = 733 1,000
75. Based on the sinking fund method and using the data in the previous problem, what number of
71. Operator A produces 120 spindle/hr on a lathe. His hourly rate is $1.80. Operator B, using an
days must the machine be used if the amount to be accumulated in 10 years is $50, 000?
identical lathe, is able to produce 150 identically units/hr. The overhead charge for a lathe is fixed
SOLUTION:
at $2.50/hr. Determine operator B’s hourly rate so that his cost per piece is identical to A’s.
SOLUTION: R = S i / [(1+i)n – 1 ]
For i = 5% and n = 10
Cost per unit for operator A = 1.80 + 2.50 = $0.0358
120
i/[(1+i)n – 1 ] = 0.0795
Let x = hourly rate of operator B. Then;
x + 2.50 = $0.0358
150 therefore R = 50, 000 x 0.0795
x = $2.88 R = $3975

m = 3975/400 = 9.9 or 10 days


72. In a type 1 warehouse, initial cost will be $24, 000.This warehouse has adequate capacity for
76. A consulting engineer decides to set up an educational fund for his son that will provide $3000
the near future, but 12 years from now an addition will be required that costs $15, 000. A type 2
per year for 6 years starting in 16 years. The best interest rate he can expect to get is 5%
warehouse costs $34, 000. This type has the same capacity as the type 1 warehouse with its
compounded quarterly. He wants to accumulate the necessary capital by making quarterly deposits
addition. What will be the present cost of the type 1 warehouse? Which of these should be built,
until his son starts college. What will be his needed quarterly deposit?
assuming that depreciation is negligible and that the interest rate is 7%?
SOLUTION:
GIVEN: i = (1+ 0.05 )4 - 1
4
Present cost = $15, 000
i = 0.051
Present worth factor, i = 7%
Unit Operations Economics
dCt/dW = k1 – k2/W
Six equal payments of $3, 000 are required; their worth at the beginning of the 16th year is
the minimum cost can be ascertained by equating the right hand side of the above eqn to 0.
P = R [ ( 1+ i )n – 1] / i (1 + i ) n
= 3000 [ (1+0.051)6 – 1] / 0.051 ( 1+0.051)6 W = ($ x lb)1/2 = lb
P = $15, 210 ( $/lb)1/2

77. The engineer has 15 years to accumulate this fund. His quarterly deposits are determined by u Therefore, minimum cost occurs when:
sing the sinking factor. There are 15 x 4 or 60 interest payments to be made at a quarterly interest W = (k2/k1)1/2 lb
rate of 0.0125
SOLUTION:
R = Si/[(1+i)n – 1 ] 80. Based on the previous problem, what is the minimum total cost?
Using n = 60 SOLUTION:
R = $15, 210 ( 1/88.5745) Ct = [k1(k2 / k1)1/2 = k2 (k1 / k2) ½ + Co]
R = $172.00 where 88.5745 represents the amount of annuity.
81. Methyl alcohol condensed at 148 F is to be cooled to 100 F for storage at a rate of 10,
78. A low carbon steel machine part, costing $350 installed, lasts 6 years when operating in a 000gal/hr by water available at 75 F in a countercurrent heat exchanger. The over-all heat transfer
corrosive atmosphere. An identically shaped part, but treated for corrosion resistance, would cost coefficient is constant and estimated at 200 Btu/ft 2-hr-F. Heat exchanger annual costs including
$650 installed. How long would the corrosion resistance part have to last to be at least as good operation are estimated at $2 per ft2 including depreciation. The cooler is to operate 5, 000 hr/year,
investment as the untreated part? Assume money is worth 7%. and the value of heat utilized is estimated at $5x10-7 per Btu. What is the estimated optimum cost
SOLUTION: of the heat exchanger if the cost for surface is $9 per ft2?
R=P [ i(1+i)n ]
[ (1+i)n - 1] SOLUTION:
= 350 x 0.2098 Since the outlet temperature is fixed;
R = $73.50 per year required ∆t is fixed at 100 – 75 = 25 F

$73.50 = $650 x c.r.f. Hourly cost: 2 = $4x10-4 per (ft2-hr)


c.r.f. = 73.50/ 650.00 = 0.113 5, 000

for n = 14 crf = 0.114 ∆t1 = (M/R) (T1 – t1) = 4/5 x 103 (148 – 75) = 11.7 F
n=x crf = U x 25 200 x 25
0.113
n = 15 crf = 0.109 crf = Outlet temp. for water : 148 – 11.7 = 136 F
0.109 cp = 0.5
ρ methanol = 0.79g/cc
Difference = 15 -14 = 1.00 0.005 0.004 q = 10, 000 x 8.33 x 0.79 (0.5)(148 -100) = 1, 580, 000 Btu/ hr

0.004/0.005 = (15 – x)/ 1.00 ∆tm = 25 – 11.7 = 17.7


ln (25/11.7)
x = 14.20 years
q = UA∆t
79. The total cost of a cast product consists of (1) the raw material cost that is directly proportional A= 1, 580, 000
to the weight, of the casting, (2) the machining cost that varies inversely as the weight, and (3) 200 x 17.7
overhead cost that remains constant per unit produced regardless of weight. Find the weight giving A = 446 ft2
the minimum cost per casting. Estimated optimum cost: 446 x 9 = $4, 014

SOLUTION:
Let Ct = total cost 82. What is the most economical number of effects to use in the recovery of black liquor in a paper
Cw = cost based on weight plant if the following cost data are available? The annual fixed costs increase essentially linearly
Cm = machining cost with each effect (except for condensing, feeding, and other equipment costs for multiple units
Co = overhead unit cost which may be considered to balance each other). If a fixed amount of evaporation is to be
W = weight obtained and each units to have 1, 000 ft2 of heating surface with a service life of five years, the
Cw = k1W (direct proportion of raw material cost to weight) annual fixed costs Cf would be (using cost data of $25, 000 for a single evaporator of 5, 000 ft 2,
Cm = k2/W (inverse proportion of machining cost to weight) employing the 0.6 factor, and neglecting the interest).
Co = Co (constant value)
Cf =( 1, 000)0.6 25, 000 N ……. dollars per year
The minimum total cost can be determined by differentiating cost with respect to weight. 5, 000 5
Unit Operations Economics
x
where N is the number of effects. cost of fuel = 30.8 x 1gal/142000 Btu ($0.04/gal)(7200hr/yr
Because of the steam economy in multiple-effect operation, the direct costs for steam x
will decrease and the total of all annual direct costs, CD, has been established for this type of
operation as cost of fuel = 0.06246705
CD = 65, 000 N -0.95 dollars x

SOLUTION: cost of insulation = 0.06246705 + 0.3 x


Ct = 1, 900 N = 65, 000 N-0.95 x
Differentiating: dCt = 1, 900 – 61, 800 N -0.95 = 0 dTc = -0.06246705 + 0.3 = 0
2
dN x
N = 5.95 or 6
x = 5.48 in
83. A capitalized cost for a piece of equipment has been found to be $55, 000. This cost is based 85. A batch inorganic chemical operations gives product C from two chemicals A and B according
on the original cost plus the present value of an indefinite number of renewals. An annual interest to the following empirical relation:
rate of 12% was used in determining the capitalized cost. The salvage value of the equipment at
the end of the service life was estimated to be 10 years. Under these conditions, what would be the C = 2.8 (AB – AC – 1.2 BC + 0.5C2 )0.5
original cost of the equipment?
where A, B and C are pounds of respective components. The reaction rate is sufficiently high to be
GIVEN: k = $55, 000 neglected, and the time to make any batch is essentially the charging and discharging time,
i = 12% including heating up, which totals 1 hr. If A costs $0.10 per lb and B costs $0.05 per lb, what is the
Vs= 0 ratio of B to A to give the minimum costs of raw materials per lb of product . what is the cost per lb
N = 10 yrs of C?
REQUIRED : Cv
SOLUTION:
k = CR ( 1 - i)n + Vs GIVEN:
(1 + i )n – 1 Reaction:
55000 = CR ( 1 – 0.12)10 A+B C
(1 + 0.12 )10 – 1 1 hr – time per batch
CR = $37, 291.47 A = $0.10/lb
B = $ 0.05/ lb
k = Cv + CR REQUIRED: minimum cost of raw materials / lb of product
(1 + 0.12 )10 – 1 SOLUTION:
Cv = $37, 291.47 Ratio of B: A = 0.5
Assume: 1 LB OF a AND 1LB OF b are used in the making of C
84. A heat treating furnace is used to preheat small steel parts. The furnace uses fuel oil consisting
$0.04 per gallon, with a heating value of 142, 000Btu/gal. The furnace has a firebrick lining, the C = 2.8 ( 1 – C – 1.2C + 0.5C2 ) 0.5
outside temperature of which is 1210 F, this is to be covered with insulation costing $300 per 1000 dC = 1.4 ( 1 – C – 1.2C + 0.5 C2) 0.5
board feet. The air temperature is 110 F. Operations is 7200 hr/yr. Conductivity is 0.028 for
insulation in Btu/hr-ft2-F. Calculate the most economical thickness of insulation. Furnace life is 8 equating to 0
years. Assume negligible temperature drop from insulation to air.
GIVEN: 0 = 1.4 (-2.2 +C)
Heat treating furnace 0 = -3.08 +C
T1 = 1210 F C = $3.08
T2 = 110 F
Cost of fuel oil $ = 0.04 / gal 86. Based from the previous problem, what is the cost per lb of C?
Heating value = 142000 Btu/gal GIVEN:
Cost of insulation = $300/1000bdft Reaction:
Operation = 7200 hrs/yr A+B C
k = 0.028 Btu 1 hr – time per batch
REQUIRED: Most economical thickness of insulation A = $0.10/lb
SOLUTION: B = $ 0.05/ lb
Basis: A = 1 ft1 REQUIRED: cost per lb of C
q = - kA∆T SOLUTION:
= - (0.028)(1)(110-1210) By ratio and proportion:
x If A = $0.1 /lb and B = $0.05/lb
q = 30.8 C = $3.08/ lb
Unit Operations Economics
Let x additional cost of equipment
87. Seven million pounds of water per year is to be obtained from 8 percent solids slurry to be FCI = $15 + x
filtered on a leaf filter to produce a cake containing 40 percent solids. The area of the filter is 200 Annual share with 15% interest
ft2. Tests show a value of 2 x 104 for k in pound units. The cake is not washed. The dumping and = 0.15 (15+x)
cleaning time is 3 hr and costs $39 each cycle. Filtration costs are $14 per hr, and inventory = 2.25 + 0.15x
charges maybe neglected. What is the cycle time for minimum costs? with 5 year payment period
GIVEN: 15 + 0.15x
7000000 lbwater/yr – can obtained from 8% slurry 5
A filter = 200 ft2 Cost of equipment invested:
Dumping and cleaning time = 3 hr = $200, 000 x / 300 tons/day (200 days/yr)
Filtration costs = $14/hr =3.33 x
REQUIRED: cycle time for minimum cost tons of concentrate per year
SOLUTION: = [500 (0.5) + 300 (0.667) + 300 (0.71) ]tons/day ( 200d/yr)
Q = A ( k θf) 0.5 = 19893 / x +1
= 200 ( 2x104)(θf)0.5 Cost total/yr = FCI + Cost concentrate + Annual Charges + Investments

7, 000, 000 lb/ yr is also equal to 799.08 lb/hr Ct = 15 +3.825x +(19893/x+1) 9+ 2.25 +0.15x +3.33x
799.08 = 200 ( 2x104)(θf)0.5 dCt/dx = 3.48x - 19893/ (x+1)2 = 0
θf = 0.014 hrs 3.48 ( x2 +2x +1) – 19893 = 0
88. Referring to the previous problem, calculate the cycle time for maximum production. by quadratic equation:
GIVEN: x = $74.6
7000000 lbwater/yr – can obtained from 8% slurry
A filter = 200 ft2 90. Determine the selling price in dollars per ton (100% mineral basis) required for which the cost
Dumping and cleaning time = 3 hr of the n new equipment is justified.
Filtration costs = $14/hr GIVEN:
θf = 0.014 hrs 500 tons/day of ore with assay of 50 % mineral
REQUIRED: cycle time for maximum production 300 tons/day of ore with assay of 66.7% mineral
Fixed cost = $15/ton
SOLUTION: Operation = 200 days/year
θtotal = θf + θw + θd Pay out period = 5 years
θw = 0 ; since the cake is not washed Interests = 15%
θf = 0.014 hrs No salvage value
θd = 3 hrs REQUIRED: selling price
SOLUTION:
θtotal = ( 0+0.014+3) Since x = $74.6
θtotal = 3.04 hrs. 19893 / (74.6 + 1) = $ 263.13

91. What is the % increase in recovery and rejection for the new process based on mineral and
For nos. 89- 91. gauged?
In processing 500 ton/day of ore assaying 50% mineral, 300 tons of concentrate containing 66.7 % GIVEN:
are obtained at a cost of sales ( all fixed operating cost are excluded) of $15 per ton concentrate. 500 tons/day of ore with assay of 50 % mineral
An investment of $200, 000 of concentrate that will assay 71% mineral. If the plant operates 200 300 tons/day of ore with assay of 66.7% mineral
days/year, equipment must pay out in 5 years with interest at 15% and no salvage value and no Fixed cost = $15/ton
additional labor or repair costs need to be considered. Operation = 200 days/year
Pay out period = 5 years
89. Based on the stated problem above, calculate the additional cost per ton of concentrate for Interests = 15%
capital recovery on the new equipment. No salvage value
GIVEN: Selling price = $ 263.13
500 tons/day of ore with assay of 50 % mineral REQUIRED: efficiency
300 tons/day of ore with assay of 66.7% mineral SOLUTION:
fixed cost = $15/ton E = 500(0.5) + 300(0.6667) – 300(0.71)
Operation = 200 days/year 500(0.5) + 300(0.6667)
Pay out period = 5 years E = 52.677%
Interests = 15%
No salvage value 92. A ties on a plant railroad sliding are to be replaced. Untreated ties consisting $ 2.50 installed
REQUIRED: additional cost per ton concentrate have a life of 7 years. If created ties have a life of 10 years, what is the maximum installed cost that
SOLUTION: should be paid for treated ties if money is worth 8 percent?
Unit Operations Economics
GIVEN: F = 24, 457.24
Untreated ties = $2.50 96. At a certain interest rate compounded quarterly, P1, 000 will amount to P4, 500 in 15 years.
n=7 What is the amount at the end of 10 years?
Created ties = X SOLUTION:
n = 10
REQUIRED: maximum installed cost For 15 years, P = 1000
n = 4 (15); 6o periods
SOLUTION: F = 4, 500
Getting the annual depreciation cost
F= P (1+i)n
0.08 = (2.50/7) – ( x /10) 4, 500 = 1, 000 (1+ i)60
X – 2.50 i = 0.02538

X = $3.10 For 10 years


n = 4 (10); 40 periods
93. Powdered coal having a heating value of 13, 500 Btu/ lb is to be compared with fuel oil worth F= 1, 000 (1 + 0.02538)40
$2.00 per bbl (42 gal) having a heating value of 130,000 Btu/gal as a source of fuel in the F = 2, 725.17 pesos
processing plant. If the efficiency of the conversion of the fuel is 64% for coal and 72 % for oil, with
all other costs being equal, what is the maximum allowable selling price for coal per ton? 97. A one bagger concrete mixer can be purchased with a down payment of P8, 000 and equal
installments of P600 each paid at the end of every month for the next 12 months. If the money is
SOLUTION: worth 12% compounded monthly, determine the equivalent cash prize of the mixer.
Powdered coal SOLUTION
Let x be the selling price per ton P = 8, 000 = 600 ( 1 – (1+ 0.01)-12)\
0.01
(X / ton)(ton/ 2000lb) (lb / 13500Btu) (0.64) P = 14, 753.05 pesos
= 2.37 x 10 -8- /Btu
Fuel Oil 98. A certain company makes it the policy that for any new piece of equipment, the annual
(2.00/bbl) (bbl/42gal) (gal/130000Btu)(0.72) depreciation cost should not exceed 10% of the original cost at any time with no salvage or scrap
= 2.67x 10 -7 / Btu value. Determine the length of service life necessary if the depreciation method use is straight line
Equating both prices: formula.
X = $11.13 / ton SOLUTION

94. A steam boiler is purchased on the basis of guaranteed performance. However, initial tests Vs = 0
indicate that the opening (income) cost will be P400 more per year than guaranteed. If the d = 0.10 V
expected life is 25 years and money is worth 10 %, what deduction from the purchase price would d = V –Vs
compensate the buyer for the additional operating cost? n
SOLUTION 0.10V = V – 0
n
A = 400 n = 10 years
N = 25 i = 0.10

P = 400 ( 1 – ( 1+0.10)-25)
0.10 99. Solve the previous problem with the sinking fund formula at 8%
P = 3, 630.82 pesos SOLUTION
0.10V = (V-0) ( 0.08)
95. If the sum of P12, 000 is deposited in an account earning interest at the rate of 9% (1 + 0.08)n – 1
compounded quarterly, what will it become at the end of 8 years?
n = ln 1.08
= 7.64
SOLUTION: n = 8 years

P = 12, 000 100. Determine the ordinary simple interest on $10, 000 for 9 months and 10 days if the rate of
i = 9% / 4 = 2.25% interest is 12%.
n = 8 (4) = 32 SOLUTION
9 months and 10 days = 9 (30) + 10 = 280 days
F = P(1+i)n P = $10, 000
= 12, 000 (1 + 0.0225)32 I = Pi (d/360)
Unit Operations Economics
I = 10, 000 (0.12) (280/360)
I = $933.33