CHENDU COLLEGE OF ENGINEERING & TECHNOLOGY

DEPARTMENT OF MECHANICAL ENGINEERING

QUESTION BANK
VIII SEMESTER
Sub Code/subject: MG2451
Engineering Economics and Cost Analysis
UNITI
PART-A
1. Define economics?
2. Mention two factors each which in fluencies the demand and supply?
3. Write about the cash flow in a simple economy?
4. Differentiate between engineering (technical) and economic efficiency?
5. What are the elements of cost?
6. Illustrate the effect of price on demand and supply and illustrate with the help of a diagram?
7. What is opportunity cost? (Or) Define opportunity cost?
8. What is the role of micro economical concept in industrial engineering perspective?
9. State the law of demand and what is elasticity of demand?
10. What is Break-even analysis?
11. Define breakeven point.
12. What are the ways by which the economic efficiency can be improved?
13. Define P/V ratio?
14. Define engineering economics?
15. Write any four goals of economy?
16. Explain law of supply and demand?
17. Write about factors in fluency demand?
18. Write about factors in fluency supply?
19. Define Economic efficiency?
20. Define engineering economics?
21. Define marginal cost?
22. Define marginal revenue?
23. Define sunk cost?
24. Define break even analysis?
25. Explain in detail about flow in an economy?

1.
2.
3.

4.
5.

PARTB
Explain how supply and demand determine the equilibrium price. What happens if the supply
curve shifts to the right? Illustrate.(MAY/JUN 2012)
Write short note on: Break Even Analysis, Engineering and Economic Efficiency, costs that 90
into the fixing of product cost. (MAY/JUN 2013)
(i).Define break-even point. Draw a break-even chart and explain its components.(NOV/DEC
2012)
(ii).Discuss the factors which influence demand and supply. (NOV/DEC 2012)
(i).Mention the factors influencing demand and supply (NOV/DEC 2013)
(ii).Explain the method of deriving the selling price of a product. (NOV/DEC 2013)
What is process planning? What are its objectives? Explain the various steps in process planning?
(NOV/DEC 2013)

6. Max & co has the following cost data for two successive periods..

Sales
Fixed Costs

Year I (Rs.)
50,000
10,000

(MAY/JUN 2012)

Year II (Rs.)
1,20,000
20,000

30,000
60,000
Variable Cost
Determine the breakeven point.
7. Krishna Company Ltd. Have the following details:
Fixed cost
= Rs..40,00,000
Rs.300
Variable cost per unit
=
Rs.500
Selling price per unit
=
Find
(i)
The break-even sales quantity
(ii)
The break-even sales
(iii)
Iftheactualproductionquantityis1,20,000,findthefollowing:
(1)
Contribution
(2)
Margin of safety by all methods.
(NOV/DEC 2012)
8. (i). From the following information relating to Geetha Ltd. you are required to find out
(1) PN ratio; (2)BEP; (3) Profit; (4)Margin of safety.
Total Fixed cost
Rs.4,500
Total Variable cost
Rs.7,500
Total Sales
Rs.15,000
(12) (MAY/JUN 2013)
(ii)AlsocalculatethevolumeofsalestoearnprofitofRs.6,000.(4) (MAY/JUN 2013)
9. Explain as to how the concept of elasticity of demand is superior to concept to flaw of demand.
Analyze the various types of elasticity of demand and their usefulness.
10. From the following figures find out (a) The break-even sales quantity, (b) The break-even sales,
(c) If the production quantity is30, 000, find contribution and margin of safety. Fixed
cost=Rs.10lacs, Variable cost per unit=Rs.50, selling price per unit=Rs.100.
11. Explain the scope and significance of Economics. (or) Bring out the scope of economics with
appropriate examples?
12. Discuss the main areas of applications of Engineering Economics and Explain the process of
material selection in new product development and Explain the significance of cost in managerial
decision making?
13. A firm has a fixed cost of Rs.50,000 . Selling price per unit is Rs.50 and the variable cost per unit
is Rs.25.Present level of production is 3,500 units. (a)Determine breakeven point in terms of
volume and sales value. (b)Calculate margin of safety?
14. A concern manufacturing a domestic appliance purposes to put up an improved model in the
market and the selling price for the same to be decided. The selling price will cover the over heads
and ensure the proportion of profit on sales as before. The material in the new model will cost
Rs.4,000 and the direct wageswouldbeRs.2,000. Following figures relate to the previous year:
Stock of material on1st April 2011 Rs.2Lacs.Stock of material on31stMarch 2012
Rs.2.2Lacs.Purchase of raw material in this period Rs.5.2Lacs. Manufacturing wages Rs.1.6 Lacs.
Works overhead Rs.80,000 Administrative and sales over head Rs.80,000Sales during the year
Rs.9,02,000,Suggest a selling price, overhead absorption based on percentage of direct labor
15. From the following details, calculate the break-even point. What will be the selling price per unit if
break-even point to be brought to 9000 units: variable cost per unit is Rs.750, Fixed expenses is
Rs.27Lacs, Selling price per unit is Rs.1000 and consider the following data of a economy for the
year2008. Sales is Rs.1,20,000, Fixed cost is Rs.25,000 and the variable cost is Rs.40,000.Find the
following:
(a)Contribution (b)Profit, (c)Break even analysis (BEP), (d)Margin of safety (MOS)

UNIT-II
PART-A
1.
2.
3.
4.
5.

What is value engineering?

What are the benefits of value engineering
Explain the concept of value engineering
State any two uses of value engineering.
You are expected to get Rs.100 from M/s. A & Company after two years or Rs.81 at present. If
the effective interest rate is 9% which offer will you accept? Why?
6. What would be the future value of Rs.100 invested in a fixed deposit for 5years with an interest
of 15% compounded annually?
7. What is time value of money?
8. Explain time value of money.
9. What is the difference between Accounting cost & Economic cost?
10. How much will a piece of property have to increase in value over the next 5 years, if it is to
earn10% per year on the purchase price
11. Calculate the present worth of the following paymentsRs.5000in3years, in Rs.10000 in5years.
12. What is sinking fund factor?
13. Explain the concept of discounting.
14. Mention the criteria for decision making.
15. Mention any two applications of various interest formulas.
16. What are the approaches available for make or buy decision?
17. What are the value engineering characteristics?
18. Write any four aims of value engineering?
19. Write the basic steps of value engineering?
20. Define time value of money?
21. Define single payment compound amount method?
22. Define single payment present worth factor?
23. Define equal payment series sinking fund factor method?
24. Define equal payment series present worth factor method?
25. Define equal payment series capital recovery factor method?
PARTB
1. (i).Why money to be received in the future is worthless than the money to be received
immediately? (MAY/JUN 2012)
(ii). Describe the procedure of value engineering with an example. (MAY/JUN 2012)
2. Compare and contrast the six basic types of time value of money problems with an example
situation in which they would each apply. What is making or buy decision? Discuss the
operational issues associated with the business proposals related with make or buy decision with
respect to profitability. (MAY/JUN 2012)
3. (i).Discuss the symptoms favoring the application of VANE.(6) (NOV/DEC 2012)
(ii).A person is planning for his retired life. He has 10 more years of service. He would like to
deposit20% of his salary, which is Rs.4, 000,at the end of the first year, and there after he
wishes to deposit the amount with an annual increase ofRs.500for the next 9 years with an
interest rate of15%.Find the total amount at the end of the 10th year of the above series.(10).
(NOV/DEC 2012)
4. (i). A company has to replace a present facility after 15years at an outlay of Rs.5, 00,000. It plans
to deposit an equal amount at the end of every year for the next 15years at an interest rate of18%
compounded annually. Find the equivalent amount that must be deposited at the end of every
year for the next15 years. (NOV/DEC 2012)
(ii). Discuss the advantages and application areas of values engineering. (NOV/DEC 2012)

5. (i).Explain the criteria for make or buy decision and its approach.(10) (MAY/JUN 2013)
(ii).Write the equation for Interest compounding of a capital (Yearly, half yearly and quarterly
compounding. (MAY/JUN 2013)
6. The management of a company finds that while the cost of making a component part is Rs.10,
the same is available in the market at Rs.9 with an assurance of continuous supply. Give a
suggestion whether to make or buy this part. Give also your views in case the supplier reduces
the price from Rs.9 to Rs.8.
The cost information is as follows:
Particulars Material Rs.3.50
Direct Labour 4.00
Other variable expenses 1.00
Fixed expenses 1.50
Total 10.00,
(MAY/JUN 2013)
7. (i).Write short notes on the time value of money. (NOV/DEC 2013)
(ii).A company has to replace a present facility after 10 years at an outlay of Rs.5,00,000.Ir
plans to deposit an equal amount at the end of every year for the next 15years at an interest
rate of 18% compounded annually. Find the equivalent amount that must be deposited at the
end of' even year for the next 10 years. Use equal pavmcnt series sinking fund formula.
(NOV/DEC 2013)
8. A manufacturing company has extra capacity which can be used to produce gears that the company
has been buying for Rs.300 each .If the company makes the gears, it will incur materialcostofRs.90
per unit, laborcostofRs.120 per unit and variable over head Cost of Rs.30 per unit. The annual
fixed cost associated with unused capacity is Rs.2, 40,000. Demand over the next year is estimated
at4, 000units.(a)Should the company make the gears or continue to buy? (b)Suppose the capacity
could be used by another department for the production of some pump components that would
cover its fixed and variable cost and contribute Rs.90,000 to profit, which would be more
advantages, gear production or pump components production?(16) (NOV/DEC 2013)
9. What are all the function, aims of value engineering? Discuss the value engineering procedure and
Differentiate between value analysis and value engineering.
10. Mr. Kumar is planning for his retired life. He has 10 more years of service. He would like to
deposit Rs.8500 at the end of the first year and there after he wishes to deposit the amount with an
annual decrease of Rs.500 for the next nine months with an interest rateof15%.Find the total
amount at the end of the 10thyear of the above series?
11. Mr.Ganesh is planning for his retired life. He has10 more years of service. He would like to deposit
20% of his salary, which is Rs.10, 000, at the end of the first year and there after he wishes to
deposit every year with an annual increase of Rs.2000forthe next 9 years. At an interest rate
of20%.Find the total amount at the end of the 10thyear at which time he retires.

12. A manufacturing company has extra capacity which can be used to produce gears that the company
has been buying for Rs.300 each .If the company makes the gears, it will incur materialcostofRs.90
per unit, laborcostofRs.120 per unit and variable over head Cost of Rs.30 per unit. The annual
fixed cost associated with unused capacity is Rs.2, 40,000. Demand over the next year is estimated
at4, 000units.(a)Should the company make the gears or continue to buy? (b)Suppose the capacity
could be used by another department for the production of some pump components that would
cover its fixed and variable cost and contribute Rs.90,000 to profit, which would be more
advantages, gear production or pump components production?(16) (NOV/DEC 2013)
13. How does the study of value engineering help a business manager in decision making? Illustrate
your answer with examples.
14. Ramesh is planning to invest Rs.80,000 per year for another 15 years. Banker is offering 7%
interest, compounded annually. Calculate the amount Ramesh will get after 15 years. And A

businessman is planning for an investment of Rs.25 lacs. He expects 80%f his investment can be
borrowed from the bank as loan at16% interest. Loan borrowed should be repaid in12yearly equal
installments. Find the installment amount and the total interest to be paid.
15. An investment banker has announced a new scheme @12% interest in which the investor can
invest Rs.5000 per month for 12 months and Rs.5, 500 per month for the next12
monthsandRs.6,000 per month for thenext12 months. Find the maturity value at the end of third
year. And A banking company offers the following investment proposals :( a)10% interestfor10
years compounded quarterly. (b)11% interest for 10 years compounded half yearly. Which offer
will you accept? Why?
UNIT-III
PARTA
1. What is meant by condition monitoring?
2. Why the temperature monitoring is necessary
3. What is the use of correction monitoring?
4. Compare NPV method and cost benefit ratio.
5. How to identify the cracks?
6. How to analyze the vibration?
7. What are the causes of vibration?
8. Differentiate on load testing and off load testing.
9. What are the instruments used in condition monitoring?
10. What is IRR? Why it is preferred?
11. Define IRR and MARR.
12. How does present worth method help in comparing alternatives?
13. What are the advantages of Rate of Return Method?
14. What is the time value of money?
15. What is annual equivalent method of comparing alternatives?
16. What is revenue-dominated cash flow?
17. Mention the various rates of return methods.
18. What is present worth method?
19. What is PWM of evaluating investment proposal?
20. How is rate of return method useful in evaluating the alternatives?
21. What is rate of return method of evaluating investment profitability?
22. What is the basic concept of annual equivalent method of comparison?
23. What is the basic concept of present worth method of comparison?
24. What is cost dominated cash flow diagram?
25. Define Rate of return method.

PART-B
1. Shiva has arranged to buy some testing machine for his hospital. He estimates that it will have a
6year useful life and no salvage value at the end of equipment life. The dealer has offered two
alternative ways to pay for the equipment. (i)ParRs.90,000 immediately and Rs.10,000 at the end
of one year. (ii)Pay nothing until the end of fourth year when a single payment of Rs.1,25,000
must be made. If he thinks that 14% is a suitable interest rate, which alternative is the best for
him? Explain rate of return method with example? (MAY/JUN 2012)
2. XYZ finance is coming with an option ofacceptingRs.10,000 now and paying a sum of
Rs.1,60,000 after 20 years. ABC finance is coming with a similar option of accepting
Rs.10,000 now and paying a sum of Rs.3,00,000 after 25 years. Compare and select the best
alternative based on the future worth method of comparison with 15% interest rate, compounded
annually. (MAY/JUN 2012)

3. Explain the concept Cash flow and different methods of comparison of alternatives. List the
merits and Limitation of each method if any. (MAY/JUN 2013)
4. Calculate the Average rate of return for projects A and B from the following:
Project
A
B
Investment Rs.
20,000
30,000
Expected life
4years
5years
No salvage value.
Projected Net Income (after interest, depreciation and taxes)
Years Project A
Project B
Rs.
Rs.
1
2,000
3,000
2
1,500
3,000
3
1,500
2,000
4
1,000
1,000
5
_
1000
_____
______
6000
10000
(MAY/JUN 2013)
5. A ransport company has been looking for a new tyre for its truck and has located the
following alternatives: Brand
tyre warranty (month) Price per tyre (Rs.)
A
12
1,200
B
24
1,800
C
36
2,100
D
48
2,700 . . . If the company feels that the warranty period is a good
estimate of the tyre life and that a nominal interest rate (compounded annually)of12% is
appropriate, which tyre should it buy? (NOV/DEC 2012)
6. A company must decide whether to buy machine A or machine B:
Machine A
Machine B
Initial cost
Rs.4,00,000
Rs.8,00,000
Salvage value at the end of machine life Rs.2,00,000
Rs.5,50,000
Annual maintenance cost
Rs.40,0000
Useful life, in years
44
At 12% interest rate, which machine should he selected? (Use future worth method of
comparison).
(NOV/DEC 2012)
7. A person is planning a new business. The initial out lay and cash flow pattern for the new
business are as listed below. The expected life of the business is five years. Find the rate of return
for the new business.
(MAY/JUN 2011)
Period
0
Cash flow -1 lac

1
30,000

2
30,000

3
30,000

4
30,000

5
30,000

8. An engineer is considering two types of pressure sensors for a low pressure steam line. The costs
are shown below. Which should be selected based on a present worth comparison at an interest
rate of 16% per year. (MAY/JUN 2011)
Description
Fixed cost
Maintenance
cost/year
Salvage value
Life

X
Rs.76,500
12,000

Y
Rs.1,29,000
9,000

0
2years

20,000
4years

9. A company that manufactures amplified transducers is trying to divide between the machines
as given:
VARIABLE SPEED
4.5Lac
3.1Lac
1.2Lac
1Lac
8years

Fixedcost
Annualoperatingc
ost
Overhaul inyears 2
&4
Overhaulinyear5
Salvagevalue
Life

DUAL SPEED
2.4Lac
3.5Lac
60,000
80,000
6 years

Compare them on the basis of annual worth using an interest rateof15% Year? (NOV/DEC 2011)
10. A firm has identified two mutually exclusive investment proposals whose details are given
below. The life of the two alternatives is estimatedtobe5yearswithnegligible salvage value. The
minimum attractive rate of return for thefirmis12%.
Alternatives

A1

A2

Investment

1.5Lac

2.1Lac

11. Explain and discuss the future worth method methods with examples?
12. An engineer is considering two types of pressure sensors for a low pressure steam
line. The costs are shown in below. Which should be selected based on a present
worth comparison at an interest rate of 16% per year?
Type X
Rs.76,500

Type Y
Rs. 1,29,000

First cost
Maintenance
cost
12,000
9,000
Salvage
value
0
20,000
Life, years
2
4
13. Company manufacturers amplified transducers are trying to divide between the
Machines Shown below. Compare them on the basis of annul worth using an interest
of 15% per year.
Variable cost
Dual speed
First cost
Rs.4,50,000
Rs.2,40,000
Annul operating cost
3,10,000
3,50,000
Overhaul in years 2&4
60,000
------Overhaul in years 5
1,20,000
Salvage value
1,00,000
80,000
Life, years
8
6
14. Company has the three proposals for expanding its business operations. The details are given
below. Each alternative has significant salvages value at the end of its life. Assume an interest
rate of 15% compounded annually, find the best alternative for expanding the business
operation of the company using annual equivalent method.
Initial Cost
Annual
Alternative
(Rs)
cost (Rs) Life (year)
A1
25,00,000
8,00,000
10
A2
20,00,000
6,00,000
10
A3
30,00,000
10,00,000
10
15. A chemical company is planning to replace the old machine with a new machine which costs
Rs.5 lacs. Expected cash flows from the new investment share Rs.2.5lacs,Rs.2 lacs and Rs.
1,25,000 respectively for the I, II,& III years. Existing machine can be used for another 3 years
which can yield a rate of return of 8%.You are asked to suggest which machine can be used?
Why?

UNITIV
PARTA
1. Mention few applications of replacement theory.
2. What are the costs associated with the calculation of optimum period?
3. What is preventive maintenance?
4. List down the types of replacement problem.
5. List the different types of maintenance.
6. Define Economic life of an asset.
7. What is meant by Economic life of an asset?
8. Correlate the importance of inventory management in maintenance engineering.
9. What is the significance of timely maintenance?
10. What are the reasons for replacement?
11. Explain predictive maintenance.
12. Write the different types of maintenance?
13. Define prevention maintenance (PM)?
14. Define Break down maintenance?
15. Write the different types of Replacement?
16. Define economic life of an asset?
17. What are the types of Replacement policies?
18. Problems in Maintenance
19. Problems in types of Replacement?
20. What is cost of dominated cash flow?
21. What is revenue dominated cash flow?
22. Mention the various rate of return method
23. What is rate of return?
24. What is present worth method?
25. What are the advantages of preventive maintenance?

1.

2.
3.
4.
5.

PART-B
(i).What do you mean by Replacement and maintenance Analysis? State and explain different
types of replacement. (MAY/JUN 2013)
(ii) Explain the concept of Life Cycle Analysis cost. Discuss the reasons for replacement List
and explain the different types of maintenance analyze their merits and demerits? (MAY/JUN
2013)
What are the objectives of plant maintenance? Explain different types of maintenance adopted
on an industry. (MAY/JUN 2013)
Give a detailed account on the various types of replacement problems with examples.
(MAY/JUN 2012)
(i). Explain the various maintenance types with examples. (MAY/JUN 2012)
(ii) What are the general guidelines in framing a replacement policy? (MAY/JUN 2012)
A diesel engine was installed 10years ago at a cost ofRs.50,000. It has a present realizable
market value ofRs.15,000.If kept, it can be expected to last five years more, with
operating and maintenance cost of Rs.14,000per year and to have a salvage value
ofRs.8,000 at the end of the fifth year. This engine can be replaced with an improved version
costing Rs.65,000, which has an expected life of 20years. This improved version will have an
estimated annual operating and maintenance cost of Rs.9,000 and ultimate salvage value
ofRs.13,000.Using an interest rate of15%,make an annual equivalent cost analysis to
determine whether to keep or replace the old engine. (NOV/DEC 2012)

6. An electronic equipment contains 1,000resistors.When any resistor fails, it is replaced. The cost
of replacing a resistor individually is Rs. 10. If all the resistors are replaced at the same time,
the cost per resistor isRs.4. The per cent surviving, S (i) atthe end of month is tabulated as
follows:
i

S(i) 100

96

89

68

37

13

which is the optimum replacement plan. (NOV/DEC 2012)

7. (i).Define economic life of an equipment and list and explain the different types of
maintenance? (NOV/DEC 2013)
(ii).A firm is considering replacement of equipment, whose first cost is Rs.1750 and the scrap
caulis negligible at any year. Based on experience, it was found that the maintenance cost is
zero during the first year and it increases by Rs.100 every year thereafter. (a)When should the
equipment be replaced if i=0% and (b) When should the equipment be replaced if i=12%.
(NOV/DEC 2013)
8. Two years ago, a machine was purchased at a cost of Rs.2 Lac to be useful for 8 years, its
salvage value at the end of its life is Rs.25, 000. The annual maintenance cost is Rs.25,000. The
market value of the present machine isRs.1, 20,000. Now a new machine to cater to the need of
the present machine is available at Rs.1, 50,000 to be useful for 6 years. Its annual
maintenance cost is Rs.14, 000. The salvage value of the new machine is Rs.20, 000. Using an
interest rate of12% find whether it is worth replacing the present machine with a new machine?
(NOV/DEC 2013)
9. Discuss the concept of challengers and defender in replacing an old asset with a new asset?
And explain with example the simple probabilistic models for the items which fail completely?
10. Initial cost of a machine is Rs.6 Lac with other details as below:
Year
Resale value
Cost of spars
Cost of labor

1
4,20,000
40,000
1,40,000

2
3Lac
42,700
1,60,000

3
2,04,000
48,800
1,80,000

4
1,44,000
57,000
2,10,000

5
96,500
68,000
2,50,000

Determine the optimum period for replacement of the machine?

11. A couple of years ago, a machine was purchased at a cost of Rs.2 Lac to be useful for 8 years.
Its salvage value at the end of its life is Rs.25,000. (The annual maintenance cost is
Rs.25,000).The market value of the present machine is Rs.1,20,000. Now, a new machine to
cater to the need of the present machine is available at Rs.1,50,000 to be useful for 6 years. Its
annual maintenance cost is Rs.14,000. The salvage value of the new machine is Rs.20,000.
Using an interest rate of12% find whether it is worth replacing the present machine with the
new machine?
12. Discuss the reasons for replacement and the different types of maintenance and distinguish
between break down and preventive maintenance? And Discuss in detail the main ten function
of production planning and control?
13. Check whether the state government should implement the project (assume i=12%). Discuss
the reasons for replacement and the different types of maintenance and distinguish between
break down and preventive maintenance? And Discuss in detail the main ten function of
production planning and control?
14. Explain the following with example: Capital recovery with return, Concept of challenger and
defender?
15. What is defender challenger concept in replacement? Illustrate with an example?

UNITV
PARTA
1. What is depreciation fund?(or)What is meant by depreciation?
2. Give the expression for the calculation of depreciation under sum-of years digits method of
depreciation.
3. What are the causes of depreciation?
4. What is benefit-cost ratio? Where it is useful?
5. Write the methods to find the depreciation of an asset.
6. 6. What is service output method of depreciation?
7. Define inflation.
8. Mention the various methods used in depreciation calculation.
9. State the objective behind provision of depreciation.
10. What is sinking fund method of depreciation?
11. Write any two differences in evaluating alternatives of private and public sector organizations?
12. What is a amortization?
13. Define Depreciation?
14. What are the types of Depreciation?
15. Define Straight line method of depreciation?
16. Define Declining balance method of depreciation?
17. Define Sum of the year-digits method of depreciation?
18. Define sinking fund method of depreciation?
19. Define Service output method of depreciation?
20. Define inflation?
21. Define the term Depreciation.
22. Mention the various method used in depreciation calculation.
23. What are the causes of depreciation?
24. Write five reasons for providing depreciation.
25. What is evaluation of public alternatives?
PARTB
1. A. state government is planning a hydroelectric project for a river basin. In addition to the
production of electric power, this project will provide flood control, irrigation and recreation
benefits. The estimated benefits and the cost that are expected to be derived from this project are
as follows:
Initial cost= Rs.8, 00, 00,000
Annual power sales= Rs. 60, 00,000
Annual flood control savings =Rs. 30, 00,000
Annual irrigation benefits =Rs.50, 00,000
Annual recreation benefits= Rs.20, 00,000
Annual operating and maintaining cost= Rs.30, 00,000
Life of the project =50years.
(NOV/DEC 2013)
2. (i). Distinguish between declining balance method of depreciation and double declining
balance method of depreciation.
(NOV/DEC 2013)
(ii) A company has purchased equipment whose first cost is Rs. 1, 00,000 with an estimated life
of eight years. The estimated salvage value of the equipment at the end of its life time is Rs.20,
000. Determine the depreciation charge and book value at the end of various years using the
straight line method of depreciation.
(NOV/DEC 2013)

3. (i). An automobile company has purchased a wheel alignment device for Rs. 10, 00,000. The
device can be used for 15years. The salvage value at the end of the life of the device is 10% of the
purchase value. Find the following using the double declining balance method of depreciation :(1)
Depreciation at the end of the seventh year. (2) Depreciation at the end of the twelfth year. (3)
Book value at the end of the eight year
(NOV/DEC 2012)
(ii) The first coat of a road laying machine is Rs. 80, 00,000. Its salvage value after five years is
Rs.50, 000. The length of road that can be laid by the machine during its life time is 75,000km. In
its third year of operation, the length of road laid is 2,000 km. find the depreciation of the
equipment for that year.
(NOV/DEC 2012)
4. (i). A company has purchased equipment whose first cost is Rs. 1, 00,000 with an
estimated life of eight years. The estimated salvage value of the equipment at the end of its life
time is Rs. 20,000. Determine the depreciation charge and book value at end of the year using
straight line method of depreciation. (NOV/DEC 2012)
(ii) A company has purchased a bus for its officers for Rs. 10, 00,000. The expected life of the bus
is eight years. The salvage value of the bus at the end of its life is Rs. 1, 50,000. Find the following
using the sinking fund method of depreciation :( 1) Depreciation at the end of the third and fifth
year (2) Book value at the end of the second year and sixth year. (NOV/DEC 2012)
5. (i).What do you mean by depreciation? Explain any 4 methods with example. (MAY/JUN 2013)
(ii) Write on: Inflation, Accelerated Depreciation. Discuss in detail about Declining balance and
Sinking fund method of depreciation? (MAY/JUN 2013)
6. A company purchased Machinery for Rs.1, 00,000. Its installation costs amounted to Rs.10,000. Its
estimated life is 5 years and the scrap value is Rs.5, 000.Calculate the amount and rate of
depreciation. And what is functional Depreciation? (MAY/JUN 2013)
7. A company has purchased a bus for its officers for Rs.10 Lac; the expected life of the bus is 8years.
The salvage value of the bus at the end of its life is Rs.1, 50,000. Find the following using the
sinking fund method of depreciation. (a) Deprecation at the end of the 3rd year and 5th year. (b)
Book value at the end of the 2nd year and 6th year? (MAY/JUN 2011)
8. A company has recently purchased an over head travelling crane for Rs.25 Lac. Its expected life
is7 years and the salvage value at the end of the life of the over head travelling crane is Rs.1 Lac.
Using the straight line method of depreciation, find the depreciation and the book value at the end
of third and fourth year after the crane is purchased? (MAY/JUN 2011)
9. How will you evaluate the public alternatives? Explain in detail?
10. The Alpha drug company has just purchased a capsulation machine for Rs.20Lac. The plant
engineer estimates that the machine has a useful life of 5 years and a salvage value of Rs.25,000 at
the end of its useful life. Compute the depreciation schedule for the machine by each of the
following depreciation methods. (a)Straight-line method of depreciation and (b) Sum-of-digit
method of depreciation?
11. A company has purchased a photo copying machine for Rs.2 Lac. The salvage value of the
machine at the end of its useful life would be insignificant?
12. The maximum number of copies that can be taken during its life time is 1 core. During the fourth
year of its operation, the number of copies taken is 9 Lac. Find the depreciation of the
photocopying machine using the service-output method of depreciation?
13. Explain and distinguish between moderate, galloping and hyperinflation. How do these kinds of
inflation affect the economic growth of a nation?
14. Discuss all the methods of depreciation?
15. The first cost of a road laying machine is Rs.80 Lac. Its salvage value after 5 years isRs.50, 000.
The length of the road that can be laid by the machine during its life time is 75,000?