UNIT TEST
ENGINEERING ECONOMICS
1.A housewife bought a brand-new washing
machine costing P 12,000 if paid in
cash. However, she can purchase it on an
installment basis to be paid within 5
years. If money is worth 8% compounded
annually, what is her yearly
amortization if all payments are to be
made at the beginning of each year?
A. P 2,782.85
B. P2,872.58
C. P 2,400.00
D. P 2,827.58
2. Mr. Ayala borrows P 100,000 at 10%
effective annual interest. He must pay
back the loan over 30 years with uniform
monthly payments due on the first day of
each month. What does Mr. Ayala pay each
month?
A. P 870.00
B. P 846.00
C. P 878.00
D. P 839.00
3. The annual maintenance cost of a
machine is P 70,000. If the cost of
making a forging is P 56 and its selling
price is P 125 per forged unit. Find the
number of units to be forged to break
even.
A. 1015 units
B. 985 units
C. 1100 units
D. 1000 units
4. A company which manufactures electric
motors has a production capacity of 200
motors a month. The variable costs are P
150.00 per motor. The average selling
price of the motors is P 275.00. Fixed
costs of the company amount to P 20,000
per month which includes taxes. The
number of motors that must be sold each
month to break even is closest to:
A. 40
B. 150
C. 80
Prepared by: Engr. B.M. Amansec
D. 160
5. A company must relocate one of its
factories in three years. Equipment for
the loading dock is being considered for
purchase. The original cost is P 20,000,
the salvage value of the equipment after
three years is P 8,000. The company's
rate of return on the money is 10%.
Determine the capital recovery rate per
year.
A P5,115
B. P 4,946
C. P 5,625
D. P4,805
6. CE Board May 1997
A corporation uses a type of motor truck
which costs P 5,000 with a life of 2
years and final salvage value of P 800.
How much could the corporation afford to
pay for another type of truck of the
same purpose whose life is 3 years with
a final salvage value of P 1,000. Money
is worth 4%.
A. P8,450.66
B. P7,164.37
C. P 6,398.24
D. P 9,034.56
7. An asset is purchased for P 9,000.00.
Its estimated life is 10 years after
which it will be sold for P 1,000.00.
Find the book value during the first
year if sum-of-years digit (SYD)
depreciation is used.
A. P 8,000.00
B. P6,500.00
C. P 7,545.00
D. P 6,000.00
8. The maintenance cost for a sewing
machine this year is expected to be P
500 The cost will increase P 50 each
year for the subsequent 9 years. The
interest is 8 % compounded annually.
What is the approximate present worth of
maintenance of the machine over the full
10-year period?
 UNIT TEST

ENGINEERING ECONOMICS

Prepared by: Engr. B.M. Amansec

A. P 4,700 B. P 12,610

B. P 5,300 C. P 12,600

C. P 4,300 D. P 12,300

D. P 5,500 13. Find the present value in pesos, of

9. A unit of welding machine cost P
45,000 with an estimated life of 5
years. Its salvage value is P 2,500.
Find its depreciation rate by straight-
line method.
A. 17.75%
B. 19.88%
C. 18.89%
D. 15.56%
10. A machine has an initial cost of P
50,000 and a salvage value of P 10,000
after 10 years. Find the book value
after 5 years using straight-line
depreciation.
A. P 12,500
B. P 30,000
C. P 16,400
D. P 22,300
11. A company issued 50 bonds of P
1,000.00 face value each, redeemable at
par at the end of 15 years to accumulate
the funds required for redemption. The
firm established a sinking fund
consisting of annual deposits, the
interest rate of the fund being 4%. What
was the principal in the fund at the end
of the 12th year?
A. P 35,983.00
B. P 38,378.00
C. P 41,453.00
a perpetuity of P15,000 payable semi-
annually if money is worth 8% compounded
quarterly.
A. P 372,537
B. P 374,977
C. P 373,767
D. P 371,287
Situation 1. A factory engaged in the
fabrication of an automotive part in a
production capacity of 700,00 units per
year is only operating at 62% of
capacity due to un availability of the
necessary foreign currency to finance
the importation of their materials. The
annual income is P430,000.00 , annual
fixed cost are P190,000.00 and variable
cost are P0.348 per unit.
14.What is the current profit or loss?
a.P88,968.00
b.P56,897.00
c.P67987.00
d.P87,908.00
15.What is the break-even point?
a.245,783 units
b.295,490 units
c.125,855 units
d.483,679 units
16. What rate in percent compounded
semi-annually
is equivalent to 20% compounded
annually?

D. P 37,519.00 a. 22.2 %

12. A manufacturing firm wishes to give b. 19.09%

each 80 employees a holiday bonus. How
c. 18.56%
much is needed to invest monthly for a
year at 12 % nominal interest rate d. 16.50%
compounded monthly, so that each
17. A refrigerators cost P 15,000 when
employee will receive a P 2,000 bonus?
it is new. It depreciates at the rate of
10% per year. What would it worth after
A. P 12,608
10 years?
 UNIT TEST

ENGINEERING ECONOMICS

Prepared by: Engr. B.M. Amansec

a. P5,130.18 d.145000php

b. P5,330.00 22. Compute the book value after 10

years using sinking fund method.
c. P5,240.18
a.140204.19php
d. P5,230.18
b.159795php
18. The cost of purchasing a set of
bathroom fixture is P15,000.00. if the c.101476php
purchase will be made directly with the
manufacturer, a discount of 30% can be d.198523php
availed of. What will be the cost of
discounted fixture? 22.Compute the depreciation charge in
the 10th year using declining balance
a. P12,000 method

b. P13,500 a.74634php

c. P11,500 b.11418php

d. P10,500 c.10058php

19. A young plumber deposited P1,000 in d.84693php

the bank at 6% interest compounded
annually when he started plumbing at the 23. Compute the depreciation charge in
age of 21. How much will he get from the the 10th year using SUM OF THE YEARS
bank when he retires at the age of 65? DIGIT.

a. P12,990 a.14920php

b. P12,890 b.23125php

c. P12,980 c.12750php

d. P2,770 d.25901php

20. You loan from a firm an amount of 24. The worth of the property equals
100,000 with a rate of simple interest to the original cost less depreciation
of 20 % but the interest was deducted a. Scrap value
from the loan at the time the money was
borrowed. If at the end of one year, you b. Face value
have to pay the full amount of 100,000,
what is the actual rate of interest? c. Market value

a. 18.8% d. Book value

b. 25.0% 25. Money paid for the use of

borrowed capital
c. 27.5%
a. Discount
d. 30.0%
b. Credit
Situation 2.An equipment costing
P300,000 has an estimated life of 15 c. Interest
years with a book value of P45,000 at
the end of its lifespan.Assume the d. profit
interest rate is 7%.Compute the
depreciation charge and book value after
10 years.

21.Compute the book value after 10 years

usind straight-line method.

a.155,000php

b.170,000php

c.130,000php