BSEM Engineering Economics & Cost Estimation

Question 1

What is the primary purpose of a benefit-cost ratio (BCR) analysis in engineering projects?

Accepted Answer

To compare project benefits to its costs to determine economic viability

Answer

A BCR greater than 1.0 indicates that the project's benefits outweigh its costs, signifying economic feasibility.

Question 2

Which depreciation method allocates equal expense amounts each year over an asset's useful life?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation divides the asset's depreciable cost evenly across each year of its useful life.

Question 3

In engineering economics, 'sunk cost' refers to:

Accepted Answer

Costs already incurred and unrecoverable regardless of future decisions

Answer

Sunk costs are past expenditures that cannot be recovered and should not influence future engineering or business decisions.

Question 4

What does the term 'payback period' measure in project evaluation?

Accepted Answer

The time required for cumulative savings or revenue to recover the initial investment

Answer

Payback period calculates how many years it takes for an investment's cash inflows to equal its initial cost.

Question 5

Which cost estimation method relies on historical data from similar completed projects to predict new project costs?

Accepted Answer

Analogous estimating

Answer

Analogous estimating uses actual costs from prior similar projects as a basis for estimating the current project's cost.

BSEM - Bachelor of Science in Engineering Management Practice Test