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ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING Question Bank

Unit -1
Intoduction
Part A

1. What is meant by economics?

2. Define engineering economics?
3. What is managerial economics?
4. Explain the objectives of managerial economics?
5. Difference between Microeconomics and Macroeconomics.
6. Define Managerial Decision.
7. Explain the profit maximization theory of the firm.
8. Explain the wealth maximization theory of the firm.
9. Difference between Economics and Managerial economics
10. Define Marris balanced rate of growth theory of the firm.
11. What is the basic postulate of the behavioral model of cyert and march?
12. What is decision making?. Discuss its important

Part B

1. Discuss the nature and scope of managerial economics.

2. How far is profit maximization the basic objective of a firm? What are the reasons for
Limiting period.
3. Explain Baumols sales maximization theory.
4. Explain different types of managerial decisions.
5. Decision making is central in the process of management Discuss.
6. What do you understand by the process of decision making? What are the main stages
in the process of rational decision making?

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Unit II
Demand & Supply Analysis
Part-A

1. State the law of demand?

2. List out the factors influencing demand.
3. What do you understand by the term elasticity of demand?
4. State any two factors influencing demand and supply.
5. When is a commodity said to have elastic demand?
6. Give the formula for measuring price elasticity of demand.
7. What is demand forecasting?
8. What is Delphi method? Explain its procedure.
9. List out the factors affecting demand forecasting.
10. Distinguish between elastic and inelastic demand.
11. State the assumptions of law of supply.
12. Give any three factors affecting elasticity of supply.
13. What is Income Elasticity of demand?
14. What is Cross Elasticity of demand?
15. What is Forecasting of demand?

Part-B

1. What is demand function? Explain the importance determinants of demand.

2. Define price elasticity of demand. Describe the various methods of measuring the
Same.
3. Define elasticity of demand and distinguish its types. Discuss the role of elasticity
Of demand.
4. Distinguish between price elasticity, income elasticity, and cross elasticity of
demand.
5. Define Supply and discuss the law of supply.
6. What is meant by demand forecasting ? Explain the methods used in demand
Forecasting and their limitations.

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Unit III
Production and Cost Analysis
Part-A

1. What is Production Function?

2. What is the purpose of production analysis?
3. What are the importances of production Function?
4. What are the different Managerial uses of production function?
5. Write a short note on Isoquant.
6. What is different between the short run and long run?
7. Distinguish between return to a factor and return to scale.
8. What are the advantages of small scale production?
9. What are the three stage of production?
10. What is Opportunity Cost?
11. What is Break even point?
12. What is cost output relationship?
13. Explain the term sunk cost and Implicit cost.
14. What is incremental cost?
15. Write a short note on Historical and Sunk cost.
Part-B
1. Explain the nature and managerial uses of production.
2. Explain the law of diminishing marginal returns.
3. Explain and discuss the production function of Cobb- Douglas type.
4. What is the difference between return to scale and return to production?
5. Discuss the properties of Isoquants.
6. Explain the features of Short-run Average Cost curve and Long-run Average- Cost
curve
7. Write an essay on Cost-Output relation in the short run and long run.

Unit-IV
Pricing
Part-A

1. What is pricing?
2. What is Marginal Cost pricing?
3. What is price discrimination?
4. What are the features of Oligopoly?
5. What is a market?

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6. What is perfect competition?
7. What is imperfect competition?
8. What is Monopolistic competition?
9. Explain Oligopoly.
10. Give the three features of Oligopoly.
11. What is a Monopoly? What are its features?
12. What are the features of perfectly competition?
13. What are the features of monopolistic competition?
14. Distinguish between monopoly and oligopoly.
15. What is product differentiation?
Part-B

1. What are the different pricing methods adopted in practice?

2. What is pricing? Explain any four different methods of pricing known to you.
3. Discuss various techniques of price formulation in actual business situation.
4. Distinguish between perfect competition and monopoly.
5. Explain different types of competitive situations that may possibly be found in a
Market.
6. Define oligopoly. State its importance features.
7. Discuss the uses and limitation of marginal cost pricing.
8. Distinguish between Cost approach to pricing and market approach to pricing.

Unit-V
Financial Accounting
Part-A

1.

Define Accounting.

2.

Define financial accounting.

3.

What are the objectives of financial Accounting?

4.

What is Trail Balance?

5.

What is Profit & Loss Accounts?

6.

What is Balance sheet?

7.

What is book keeping?

8.

Define Management Accounting.

9.

What are the objectives of Management Accounting?

10. Define Funds flow Statement?

11. What are the objectives of Fund flow Statement?
12. Explain the items of sources and application of funds.

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13. Explain the meaning of a cash flow statement
14. Explain the meaning of the term financial statements.
15. What is meant by analysis and interpretation of financial statements?
16. What is comparative Statement?
17. What is Common size Statement?
18. What is Trend analysis?
19. What is Ratio?
20. What are the uses of Ratio?
Part-B

1.

From the follwing Trail Balance. Prepare(i) trading and Profit and Loss a/c

(ii)Balance sheet

Trial Balance as on 31.12.2005

Debit Balance

Cash in Hand

Rs

2,000

Credit Balance

Rs

Capital

2, 00,000
2, 54,800

Machinery

60,000

Sales

Stock

50,000

Sundry Creditors

40,000

Bank Overdraft

22,000

Bills Receivables

1,600

Sundry Debtors

50,000

Return Outwards

3,000

Wages

70,000

Discount Received

1,800

Land

40,000

Bills Payable

1,800

Carriage Inwards

2,400

Purchases

24,000

Salaries

24,000

Rent

4,000

Postage

1,000

Return Inwards

3,200

Drawings

10,000

Furniture

18,000

Interest
Cash at Bank

600
6,600
--------- -------5, 23,400
-----------------

--------------5,23,400
---------------

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Adjustments:
(i)

Stock as on 31.12.2005 was Rs.4,000

(ii)

Outstanding Rent Rs.4,000

(iii)

Provision for Bad debits is to be 10%

(iv)
2. Prepare Trading and Profit and Loss Accounts for the year ended 31st March,
1990 and Balance Sheet as at the date from the following Trail Balance of K.Rama
Rao

Debit Balance

Rs

Credit Balance

Rs

Drawings

45,000

Capital

Good Will

80,000

Bills Payable

33,800

Land and Buildings

60,000

Creditors

70,000

Plant and Machinery

40,000

Purchases Returns

Loose Tools

3,000

Bills Receivable

3,000

Stock,1st April , 1989

Purchases
Wages
Carriage Outwards

40,000
2, 51,000
20,000
500

Carriage Inwards

1, 000

Coal

5, 800

Salaries

35,000

Rent,Rates,&Taxes

2,800

Discount

1,500

Cash at Bank

25,000

Cash in Hand

400

Sundry Debtors
Repairs
Printing and Stationery

45,000
1,800
500

Bad Debts

1,200

Advertisements

3,500

Sales Returns

2,000

Furniture
General Expenses

11,000
5,250

Sales

1, 60,000

2,650
4, 18,000

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Adjustments:
(i)

Closing Stock on 31st March, 1990 was Rs 35,000.

(ii)

Depreciate Plant and Machinery ,Tools and Furniture by 10% and Land and
Building by 5%.

(iii)

Provide Rs 1,500 for Wages

(iv)

Advertisement Prepaid are Rs. 500

(v)

Provide 5% on Debtors against bad debts and Discount.

3.The following is the Trial balance of XYZ Ltd as on 30th June 2005.
Particular

Debit
Rs

Capital

Credit
Rs

1, 86,000

Drawings

15,735

Stock on 1-7-2004

17,280

Sundry Creditors

80,900

Sundry Debtors

43,500

Machinery

60,000

Patents

22,500

Freehold land

30,000

Buildings

96,000

Sales
Purchases
Sales returns

2, 96,340

1, 22,025

2,040

Purchases returns

1,500

Cash at bank

7,890

Cash in hand

1,620

Insurance

1,800

General expenses

9,000

Salaries

45,000

Wages

25,440

Factory Fuel

14,190

Carriage on purchases

6,120

Carriage on sales

9,600

Rent

----------5, 29,740
-----------

27,000
--------------5, 29,740
----------------

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The following adjustment is to be effected:

(i)

stock on 30th June 2005 Rs.20,400

(ii)

5% on sundry debtors is to be written off as bad

(iii)

Salaries for the month of june amounting to Rs 4, 500 were unpaid.

(iv)

Rent Rs 3,000 is accrued but not received.

(v)

Depreciate machinery @ 10% and patents @ 20%

You are required to prepare Trading and Profit & loss Accounts and Balance Sheet as on 30-06-2005.

Capital Budgeting
Part-A

1.

What do you understand by Capital budgeting?

2.

What is payback method? Merits and demerits?

3.

What are ARR? Merits and demerits?

4.

What are NPV? Merits and demerits?

5.

What are IRR? Merits and demerits?

6.

What are the importances of Capital budgeting?

Part-B

1.

What are the various methods of evaluating capital expenditure proposals ?merits
and demerits?

2.

Project X initially cost Rs.25,000.It generates the following cash inflows:

Years

Cash inflow

PV of Re.1 at 10%

Rs.
1

9,000

0.909

8,000

0.826

7,000

0.751

6,000

0.685

5,000

0.621

Taking the cut- off rate as 10% suggest whether the project should be accepted or
Not.

3.

The Alpha Co.Ltd. Considering the purchases of a new machine. Two alternative machine (A and
B) have been suggested ,each having an initial cost Rs.40,000 and requiring Rs.20,000 as

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additional working capital at the end of 1st year Earrings after taxation are expected to be as
follows:

Year

Cash inflows
Machine A

MachineB

40,000

1, 20,000

1, 20,000

1, 60,000

1, 60,000

2, 00,000

2, 40,000

1, 20,000

1, 60,000

80,000

The company has a target of return on capital of 10% on this basis, you are
Required to compare the profitability of the machine and state which alternative you
consider financially

Year

PV at10%

4.

0.91

0.83

0.75

0.68

0.62

A choice is to be made between two competing proposal which requires an equal investment of
Rs.50,000 and are expected to generate net cash as under

Year

Project I

Project II

25,000

10,000

15,000

12,000

10,000

18,000

Nil

25,000

12,000

8,000

6,000

4,000

The cost of capital of the company is 10%.The following are the present values at
10% Per annum.

Years

PV at 10% p.a

0.909

0.826 0.751 0.683 0.621 0.564

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Calculate:
(a) Pay-Back Period
(b) Discount Cash flow method
(c) Excess present value index.

5. The following are the cash inflows and outflow of a certain project.

Years

Outflow Inflows

1, 50,000

30,000

Cash inflows

30,000

30,000

50,000

60,000

40,000

The Salvage value at the end of 5 years is Rs.40, 000. Taking the cut off rate as
10%, calculate Net present value

Year

PV @ 10% 0.909

0.826

0.751

0.683

0.621

6. A company is considering two mutually exclusive projects. Both require an

Initial of Rs.50, 000 each can have a life of five years. The cost of capital of the
Company is 10% and tax rate is 50%. The depreciation is charged on straight line
Method .The estimated net cash inflow (before depreciation and tax) of two projects
Are as follows:

Years:

Project-A (Rs) 20,000

22,000

28,000

25,000

30,000

Project-B (Rs) 30,000

27,000

22,000

25,000

30,000

Which project should be accepted as per:

(a) Pay back period.
(b) Net present value
(c) Accounting Rate of Return
(d) Profitability Index
(e) Internal Rate of Return

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