Engineering Economics MCQ Questions and Answers in Civil Engineering

Question. An asset is purchased for P 9,000.00. Its estimated economic life is 10 years after which it will be sold for P 1,000.00. Find the depreciation in the first three years using sum-of-years digit method
(a) P 3,279.27
(b) P 3,927.27
(c) P 3,729.27
(d) P 3,792.72

Answer : B

Question. The original record of a business transaction is recorded in this book.
(a) Work book
(b) Journal
(c) Ledger
(d) Account book

Answer : B

Question. Both architect and engineer make use of the cost estimate of the project:
(a) For site selection
(b) For designing of the project
(c) For choosing alternatives
(d) All of these

Answer : D

Question. The more critical (or severe) test of the firm's liquidity can be judged by:
(a) Liquidity ratio
(b) Current ratio
(c) Acid-Test (or Quick) ratio
(d) Debts ratio

Answer : C

Question. What refers to the cost of borrowing money or the amount earned by a unit principal per unit time?
(a) Yield rate
(b) Rate of return
(c) Rate of interest
(d) Economic return

Answer : C

Question. The institute of Electronics and Communications Engineers of the Philippines (IECEP) is planning to put up its own building. Two proposals being considered are:
(a) The construction of the building now to cost P 400,000
(b) The construction of a smaller building now to cost P300,000 and at the end of 5 years, an extension to be added to cost P 200,000.
By how much is proposal B more economical than proposal A if interest rate is 20% and depreciation to be neglected?
(a) P 19,122.15
(b) P 19,423.69
(c) P 19,518.03
(d) P 19,624.49

Answer : D

Question. What refers to the value of an asset which a disinterested third party, different from the buyer and seller, will determine in order to establish a price acceptable to both parties?
(a) Book value
(b) Market value
(c) Fair value
(d) Franchise value

Answer : C

Question. The ability to convert assets to cash quickly is known as ______.
(a) Solvency
(b) Liquidity
(c) Leverage
(d) Insolvency

Answer : B

Question. The project contractor relies on the cost of the estimate:
(a) For submission of a competitive bid for a lump-sum contract
(b) For a unit price contract
(c) For preparation of a definitive estimate to help negotiate contract
(d) All of these

Answer : D

Question. What is the increase in the money value of a capital asset is called?
(a) Profit
(b) Capital gain
(c) Capital expenditure
(d) Capital stock

Answer : B

Question. The common ratio is the ratio of:
(a) Net credit sales to average net receivable
(b) Current assets to current liabilities
(c) Gross profit to net sales
(d) Net income to owner’s equity

Answer : B

Question. The owner of the construction company makes use of the estimate:
(a) To determine the capital investment costs
(b) To assist in financial arrangements
(c) To determine economic feasibility of the project
(d) All of these

Answer : D

Question. Mr. Bacani borrowed money from the bank. He received from the bank P1,842 and promised to repay P2,000 at the end of 10 months. Determine the rate of simple interest.
(a) 12.19 %
(b) 12.03 %
(c) 11.54 %
(d) 10.29 %

Answer : D

Question. What is another term for “perfect competition”?
(a) Atomistic competition
(b) No-limit competition
(c) Free-for-all competition
(d) Heterogeneous market

Answer : A

Question. What are the common methods of computing depletion charge?
(a) Rational method and irrational method
(b) Conservative method and conventional method
(c) Unit method and percentage method
(d) Discrete method and depletion allowance method

Answer : C

Question. What refers to the present worth of cost associated with an asset for an infinite period of time?
(a) Annual cost
(b) Increment cost
(c) Capitalized cost
(d) Operating cost

Answer : C

Question. A VOM has a selling price of P 400. If its selling price is expected to decline at a rate of 10% per annum due to obsolescence, what will be its selling price after 5 years?
(a) P 222.67
(b) P 212.90
(c) P 236.20
(d) P 231.56

Answer : C

Question. In a cash-flow diagram:
(a) Time 0 is considered to be the present
(b) Time 1 is considered to be the end of time period 1
(c) A vertical arrow pointing up indicates a positive cash flow
(d) All of these

Answer : D

Question. A loan of P5,000 is made for a period of 15 months, at a simple interest rate of 15%, what future amount is due at the end of the loan period?
(a) 5,937.50
(b) 5,873.20
(c) 5,712.40
(d) 5,690.12

Answer : A

Question. What is another term for “acid-test ratio”?
(a) Current ratio
(b) Quick ratio
(c) Profit margin ratio
(d) Price-earnings ratio

Answer : B

Question. What is defined as the reduction of the value of certain natural resources such as mines, oil, timber, quarries, etc. due to the gradual extraction of its contents?
(a) Depletion
(b) Inflation
(c) Depreciation
(d) Deflation

Answer : A

Question. Keeping in view, the feasibility order of magnitude, the preliminary, conceptual or budget estimates, are prepared by:
(a) Architect/engineer
(b) Construction manager
(c) Owner himself/herself
(d) None of the above

Answer : C

Question. “When one of the factors of production is fixed in quantity or is difficult to increase, increasing the other factors of production will result in a less than proportionate increase in output”. This statement is known as the:
(a) Law of diminishing return
(b) Law of supply
(c) Law of demand
(d) Law of supply and demand

Answer : A

Question. Capitalized cost of a project is also known as ______.
(a) Infinite cost
(b) Life cycle cost
(c) Life cost
(d) Project cost

Answer : B

Question. What bond whose security is a mortgage on certain specified assets of the corporation?
(a) Registered bond
(b) Collateral trust bond
(c) Mortgage bond
(d) Debenture bond

Answer : C

Question. A person buys a piece of lot for P 100,000 downpayment and 10 deferred semi-annual payments of P 8,000 each, starting three years from now. What is the present value of the investment if the rate of interest is 12% compounded semi-annually?
(a) P 142,999.08
(b) P 143,104.89
(c) P 142,189.67
(d) P 143,999.08

Answer : D

Question. A factory operator bought a diesel generator set for P 10,000.00 and agreed to pay the dealer uniform sum at the end of each year for 5 years at 8% interest compounded annually, that the final payment will cancel the debt for principal and interest. What is the annual payment?
(a) P 2,500.57
(b) P 2,544.45
(c) P 2,540.56
(d) P 2,504.57

Answer : D

Question. What refers to the interest rate at which the present work of the cash flow on a project is zero of the interest earned by an investment?
(a) Economic return
(b) Yield
(c) Rate of return
(d) Return of investment

Answer : C

Question. What is an accounting term that represents an inventory account adjustment?
(a) Cost of goods sold
(b) Cost accounting
(c) Standard cost
(d) Overhead cost

Answer : B

Question. What refers to the amount of money paid for the use of borrowed capital?
(a) Interest
(b) Rate of interest
(c) Simple interest
(d) Principal

Answer : A

Question. In what method of computing depreciation where it assumes that a sinking fund is established in which funds will accumulate for replacement purposes?
(a) Straight line method
(b) Sinking fund method
(c) Sum-of-year digit method
(d) Declining balance method

Answer : B

Question. The profit derived from a project or business enterprise without consideration of obligations to financial contributors and claims of others based on profit is known as ______.
(a) Yield
(b) Economic return
(c) Earning value
(d) Gain

Answer : B

Question. A form of business organization in which a person conducts his business alone and entirely for his own profit, being solely responsible for all its activities and liabilities.
(a) Sole proprietorship
(b) Entrepreneurship
(c) Partnership
(d) Corporation

Answer : A

Question. A farmer selling eggs at 50 pesos a dozen gains 20%. If he sells the eggs at the same price after the costs of the eggs rises by 12.5%, how much will be his new gain in percent?
(a) 6.89 %
(b) 6.65 %
(c) 6.58 %
(d) 6.12 %

Answer : B

Question. What market situation exists where there is only one buyer and only one seller?
(a) Monopsony
(b) Monopoly
(c) Bilateral monopsony
(d) Bilateral monopoly

Answer : D

Question. A man invested P110,000 for 31 days. The net interest after deducting 20% withholding tax is P890.36. Find the rate of return annually.
(a) 11.50 %
(b) 11.75 %
(c) 11.95 %
(d) 12.32 %

Answer : B

Question. Mr. Jun Ramos was granted a loan of P20,000 by his employer Excel First Review and Training Center, Inc. with an interest of 6% for 180 days on the principal collected in advance. The corporation would accept a promissory note for P20,000 non-interest for 180 days. If discounted at once, find the proceeds of the note.
(a) P18,000
(b) P18,900
(c) P19,000
(d) P19,100

Answer : A

Question. What annuity is required over 12 years to equate with a future amount of P 20,000? Assume i= 6% annually.
(a) P 1,290.34
(b) P 1,185.54
(c) P 1,107.34
(d) P 1,205.74

Answer : B

Question. The monthly demand for ice cans being manufactured by Mr. Camus is 3200 pieces. With a manual operated guillotine, the unit cutting cost is P25.00. An electrically operated hydraulic guillotine was offered to Mr. Camus at a price of P275,000.00 and which cuts by 30% the unit cutting cost. Disregarding the cost of money, how many months will Mr. Camus be able to recover the cost of the machine if he decides to buy now?
(a) 10 months
(b) 11 months
(c) 12 months
(d) 13 months

Answer : C

Question. What represents the ownership of stockholders who have a residual claim on the assets of the corporation after all other claims have been settled?
(a) Authorized capital stock
(b) Preferred stock
(c) Incorporator stock
(d) Common stock

Answer : D

Question. What is the ordinary interest on P1,500.50 for 182 days at 5.2%?
(a) P39.01
(b) P39.82
(c) P39.45
(d) P39.99

Answer : C

Question. A manufacturing firm maintains one product assembly line to produce signal generators. Weekly demand for the generators is 35 units. The line operates for 7 hours per day, 5 days per week. What is the maximum production time per unit in hours required of the line to meet the demand?
(a) 1.0 hour per unit
(b) 1.2 hours per unit
(c) 1.4 hours per unit
(d) 1.6 hours per unit

Answer : A

Question. What is the reduction in the money value of capital asset is called?
(a) Capital expenditure
(b) Capital loss
(c) Loss
(d) Deficit

Answer : B

Question. The deliberate lowering of the price of a nation’s currency in terms of the accepted standard (Gold, American dollar or the British pound) is known as ______.
(a) Currency appreciation
(b) Currency depreciation
(c) Currency devaluation
(d) Currency float

Answer : C

Question. What type of depreciation is due to the reduction of the physical ability of an equipment or asset to produce results?
(a) Functional depreciation
(b) Design depreciation
(c) Physical depreciation
(d) Demand depreciation

Answer : C

Question. What is the feature of some bonds whereby the issuer can redeem it before it matures?
(a) Return clause
(b) Callability
(c) Recall clause
(d) Call class

Answer : B

Question. The interest calculated on the basis of 365 days a year, is known as:
(a) Interest
(b) Ordinary simple interest
(c) Exact simple interest
(d) None of these

Answer : C

Question. In a cash flow series:
(a) Uniform gradient signifies that an income or disbursement changes by the same amount in each interest period
(b) Either an increase or decrease in the amount of a cash flow is called the gradient
(c) The gradient in the cash flow may be positive or negative
(d) All of these

Answer : D

Question. What refers to the residual value of a company’s assets after all outside liabilities (shareholders excluded) have been allowed for?
(a) Dividend
(b) Equity
(c) Return
(d) Par value

Answer : B

Question. The ability to meet debts as they become due is known as ______.
(a) Solvency
(b) Leverage
(c) Insolvency
(d) Liquidity

Answer : A

Question. A man loans P 187,400 from a bank with interest at 5% compounded annually. He agrees to pay his obligations by paying 8 equal annual payments, the first being due at the end of 10 years. Find the annual payments.
(a) P 43,600.10
(b) P 43,489.47
(c) P 43,263.91
(d) P 43,763.20

Answer : D

Question. “Under conditions of perfect competition, the price at which any given product will be supplied and purchased is the price that will result in the supply and the demand being equal.” This statement is known as the:
(a) Law of diminishing return
(b) Law of supply
(c) Law of demand
(d) Law of supply and demand

Answer : D

Question. Liquidity ratios are used:
(a) To measure a firm’s ability to meet short-cut obligations
(b) To compare short term obligations to short-term resources available to meet these obligations
(c) To obtain much insight into the present cash solvency of the firm and the firm
(d) All of these

Answer : D

Question. Under ordinary simple interest, how many days in one year?
(a) 300
(b) 360
(c) 365
(d) 366

Answer : B

Question. What is the market situation exist when there are many buyers and many sellers?
(a) Perfect competition
(b) Oligopoly
(c) Oligopsony
(d) Monopoly

Answer : A

Question. A investor wishes to earn 7% on his capital after payment of taxes. If the income from an available investment will be taxed at an average rate of 42%, what minimum rate of return, before payment of taxes, must the investment offer to be justified?
(a) 12.07 %
(b) 12.34 %
(c) 12.67 %
(d) 12.87 %

Answer : A

Question. What is a stock of a product which is held by a trade body or government as a means of regulating the price of that product?
(a) Stock pile
(b) Hoard stock
(c) Buffer stock
(d) Withheld stock

Answer : C

Question. What is the term for an annuity with a fixed time span?
(a) Ordinary annuity
(b) Perpetuity
(c) Annuity certain
(d) Annuity due

Answer : C

Question. The true value of interest rate computed by equations for compound interest for a 1 year period is known as ______.
(a) Expected return
(b) Nominal interest
(c) Effective interest
(d) Economic return

Answer : C

Question. What refers to the goods and services that are desired by human and will be acquired only after all the needs have been satisfied?
(a) Producer products
(b) Consumer products
(c) Luxury
(d) Necessity

Answer : C

Question. The key to profitable operation for project cost control, is:
(a) To keep the project cost equal to original cost estimate
(b) To keep the project cost equal to subsequent construction budget
(c) To keep the project cost within the cost budget and knowing when and where job costs are deviating
(d) None of these

Answer : C

Question. A P 1,000,000 issue of 3%, 15-year bond was sold at 95%. What is the rate of interest of this investment?
(a) 3.0%
(b) 3.4%
(c) 3.7%
(d) 4.0%

Answer : A

Question. The depletion allowance method of computing depletion is commonly known as ______.
(a) Unit method
(b) Percentage method
(c) Factor method
(d) Sinking fund method

Answer : B

Question. Ratio analysis of a construction firm is used for analysis by:
(a) Share holders
(b) Firm's management
(c) Banks of the firm
(d) Financial analysts

Answer : D

Question. What is defined as the reduction or fall of the value of an asset due to constant use and passage of time?
(a) Depletion
(b) Inflation
(c) Depreciation
(d) Deflation

Answer : C

Question. Shell Philippines, a multinational company, has a total gross income for a particular year of P 50,000,000. The taxable income after taking all deductions except for depletion is P 18,500,000. What is the allowable depletion allowance for that particular year? Take percentage of gross income for oil as 22%.
(a) P 9,358.41
(b) P 9,228.45
(c) P 9,250.00
(d) P 9,308.45

Answer : C

Question. Lands, buildings, plants and machineries are example of what type of asset?
(a) Current asset
(b) Trade investment asset
(c) Fixed asset
(d) Intangible asset

Answer : C

Question. Miss Calledo deposited P 1,000, P 1,500 and P 2,000 at the end of the 2nd year, 3rd year and 4th year, respectively in a savings account which earned 10% per annum. How much is in the account at the end of the 4th year?
(a) P 4,880.00
(b) P 4,820.00
(c) P 4,860.00
(d) P 4,840.00

Answer : C

Question. What is the main reason why the sinking fund method of computing depreciation is seldom used in the industry?
(a) Unstable economy
(b) Rate of interest cannot be exactly determined
(c) The initial deprecation is high
(d) The initial depreciation is low

Answer : D

Question. Which is true about partnership?
(a) It has a perpetual life.
(b) It will be dissolved if one of the partners ceases to be connected with the partnership.
(c) It can be handed down from one generation of partners to another.
(d) Its capitalization must be equal for each partner.

Answer : C

Question. What is another term for “current assets”?
(a) Fixed assets
(b) Non-liquid assets
(c) Liquid assets
(d) Ccash

Answer : C

Question. The CRF (ep) is also known as: [CRF(EP) - 8% - 7], where
(a) 8% is the rate of interest per year
(b) Money is borrowed for n = 7 years
(c) Both (A) and (B)
(d) Neither (A) nor (B)

Answer : C

Question. The declining balance method is also known as ______.
(a) Double percentage method
(b) Constant percentage method
(c) Modified sinking fund method
(d) Modified SYD method

Answer : B

Question. Capitalized cost of any structure or property is computed by which formula?
(a) First cost + interest of first cost
(b) Annual cost - interest of first cost
(c) First cost + cost of perpetual maintenance
(d) First cost + salvage value

Answer : C

Question. What refers to the amount of a product made available for sale?
(a) Supply
(b) Demand
(c) Product
(d) Good

Answer : A

Question. A construction estimate is used
(a) To judge tentatively or approximate value of the project
(b) To produce a statement of the approximate cost
(c) To decide an approximation of the value of the project and not the exact cost
(d) None of these

Answer : C

Question. The product of CAF (SP) and PWF (SP) is:
(a) 1/2
(b) 1
(c) 1/3
(d) 1/4

Answer : B

Question. Salvage value is sometimes known as ______.
(a) Scrap value
(b) Going value
(c) Junk value
(d) Second-hand value

Answer : A

Question. Which is true about corporation?
(a) It is worse type of business organization.
(b) The minimum number of incorporators to start a corporation is three.
(c) Its life is dependent on the lives of the incorporators.
(d) The stock holders of the corporation are only liable to the extent of their investments.

Answer : D