BSEM Engineering Economics & Cost Estimation 2

Question 1

Which type of cost remains constant regardless of changes in production or activity level?

Accepted Answer

Fixed cost

Answer

Fixed costs such as rent or insurance do not change with production volume within a relevant operating range.

Question 2

The Internal Rate of Return (IRR) is best defined as:

Accepted Answer

The discount rate at which NPV equals zero

Answer

IRR is the discount rate that makes a project's net present value exactly equal to zero, representing its true yield.

Question 3

A project's 'life cycle cost' includes which of the following?

Accepted Answer

All costs from design through disposal, including operation and decommissioning

Answer

Life cycle cost encompasses every cost phase from initial design and construction through operation, maintenance, and eventual disposal.

Question 4

What is the break-even point in engineering economics?

Accepted Answer

The production level at which total revenue equals total cost

Answer

At the break-even point, total revenue exactly covers total cost, resulting in zero profit or loss.

Question 5

Overhead costs in a construction project are best described as:

Accepted Answer

Indirect costs not directly attributable to a single work item

Answer

Overhead costs—such as site supervision, utilities, and administrative expenses—support the project but cannot be assigned to one specific task.

BSEM - Bachelor of Science in Engineering Management Practice Test