VTU Mechanical Engineering (Semester 7)
Engineering Economy
December 2013
Total marks: --
Total time: --
(1) Assume appropriate data and state your reasons
(2) Marks are given to the right of every question
(3) Draw neat diagrams wherever necessary

1 (a) Distinguish between strategy and tactics with suitable examples
5 M
1 (b) Explain the law of demand and supply with suitable example
5 M
1 (c) Determine the effective interest rate for a nominal annual rate of 6% that is compounded i) Semi - annually ii) Quarterly iii) Monthly iv) Daily
6 M
1 (d) A person invests a sum of Rs 50.000/- in a Nationalized Bank at a Nominal interest rate of 18% for 15 years. The compounding is monthly. Find the maturity amount of the deposit after 15 years?
4 M

2 (a) State the conditions for present worth comparisons.
6 M
2 (b) Determine the equivalent present worth of the following series of year and cash flows extending over 8 years using annual interest rate of 20%

4 M
2 (c) What do you understand by present month by T2 rule?
3 M
2 (d) An Entrepreneurs intending to start a New Business knows that the first few years are the most difficult. To Lesson the chance of failure a loan plan for start up capital is proposed in which interest paid during the first two years will be at 3%, 6%. For the next 2 years if 12% For the last 2 years of the 6 years loan. How large a loan can be justified for proposed repayments at the end of 2,4 and 6 respectively for Rs 20,000/- . Rs 30,000 and Rs 50,000/- for 2nd 4 th and 6th year respectively
7 M

3 (a) Two types of power converter Alpha and Beta are under consideration for a particular application. An economic comparison is to be made at an interest rate of 10%. Following cost estimation has been obtained. Determine the Annual Equivalent c the two systems, select the best converter
Cost Particulars Alpha Beta
Purchase price Rs 10,000/- Rs 25,000/-
Estimated service life 5 years 9years
Salvage value Rs 3,00/- Rs 5,000/-
Annual operating cost Rs 2,500/- Rs 1,200/-
10 M
3 (b) A Conventional Agricultural Equipment has a service of 6 years. A,5 years: equipment is 50% costlier than the contentions] one but has many aadvantages. The operating costs of both these equipment are almost same and salvage value is negligible. What will be the service life of the New equipment that makes its cost comparable to that of the conventional one at i= 10%?
10 M

4 (a) Define the following terms 2 i) MARR ii) IRR iii) ERR.
6 M
4 (b) Explain the causes for depreciation
6 M
4 (c) An XYZ company has purchased an equipment whose first cost is Rs 2,00,000 with an estimated life of 8 years. The estimated salvage value of the equipment is Rs 40,000 at the end of its life time. Determine the depreciation charge and book value at the end of various years using SOYD method
8 M

5 (a) What are the different elements of cost? Explain.
4 M
5 (b) Differentiate between estimation and costing
4 M
5 (c) From the following data related to manufacturing a standard product for the month of Sept 2012. prepare a statement showing the cost and profit per unit.
1. Raw Material used = 40,000 2.Direct wages = 24.000
3. Machine hours worked - 9,500 hour 4. Machine hour rate @Rs 41hr
5. Office overhead 20% of works cost 6. Selling overhead @ Rs 1/unit
7. Units produced - 20,000 8. Units sold 18,000 (0] Rs 10/unit.
12 M

6 (a) What do you understand by the following Financial terms:
i) Preferential shares ii) Assets iii) Liabilities iv) Sundry debtors v) Sundry creditors.
10 M
6 (b) Following is the Financial status of a company as on 31th March 2005. prepare a Balance sheet as on 31" March 2005.
Particulars Amount (Rs)
Cash in hand 22000
Sundry debtors 10000
Bank loan's 40000
Bill's payable 20000
Equity shares 113000
Land & Buildings 50000
Plant & Machinery 90000
Inventories 15000
Creditors 30000
Bank Balance 16000
10 M

7 (a) What is a Financial Ratio? Explain Liquidity and Solvency ratio. mentioning thei significance.
10 M
7 (b) Calculate the Current Assets of XYZ company. with the following information.
i) Stock turnover =7 5 times ii) Stock at the end = 5000 more than the stock at the beginning iii) Sales - Rs 2.00.000/- iv) Gross profit ratio = 20% v) Currer liabilities = Rs 60;000 vi) Quick ratio = 0.75.
10 M

8 (a) Briefly explain the objectives of profit planning
5 M
8 (b) On 2006 June Abhilash Enterprises has Rs 10,000 cash balance. The expected sales are t- the value of Rs 7,000/-. Rs 12.000/- and Rs 15.000/- respectively. It is estimated that th disbursement is to be made in 3 months are Rs 15,000!- . Rs 16.0ool- and Rs 12,000!- Whenever a shortage occurs Bank loan is assumed to be raised to a value of Rs 5,000/- Prepare a cash budget and show the cash balance at the beginning of September
8 M
8 (c) Prepare a purchase budget from the following particulars when the estimated price/kg is X-Rs.2. Y-Rs.3. Z-Rs.4.
Material Estimated consumption of Materials in kgs
X 100000
Y 200000
Z 250000

Material Stock at the Beginning Stock at the end Estimated
X 30000 15000
Y 40000 20000
Z 45000 50000
7 M

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