PAMANTASAN NG LUNGSOD NG VALENZUELA

College of Engineering and Information technology

EM 5: ENGINEERING ECONOMICS
FINAL TERM: QUIZ NO.2 (TAKE HOME QUIZ)

INSTRUCTION: (BSEE 2-1)

1. Make a cover page, same template with your plates.
2. On the next page, write a summary of problems and final answers. (Engineering Lettering)
After each problem, write your final answer. (Express in ATMOST 2 decimal places)
3. Write your complete solutions legibly on the remaining pages.
4. Strictly NO ERASURES on your solutions and final answers.
5. Pointing System: 1 point each for every item. No solution, no point.
6. Solve SET A for even seat numbers. Solve SET B for odd seat numbers.
7. Deadline: December 6, 2019 (on or before 10AM). Late will not be entertained.

SET A

1. The cost of equipment is P 500,000 and the cost of installation is P 30,000. If the salvage value is
10% of the cost of equipment at the end of 5 years, determine the book value at the end of the 4 th
year using straight-line depreciation.
2. A certain company makes it a policy that for any new piece of equipment the annual depreciation
cost should not exceed 10% of the original cost at any time with no salvage or crap value. Determine
the length of service life necessary if the depreciation method used is Straight Line.
3. A dump truck was bought for P 300,000, six years ago. It will have a salvage value of P 30,000 four
years from now. What is its book value now if sinking fund method of depreciation is used at 6%
interest per year?
4. A certain company makes it a policy that for any new piece of equipment the annual depreciation
cost should not exceed 10% of the original cost at any time with no salvage or scrap value.
Determine the length of service life necessary if the depreciation method used is sinking fund at 8%
interest.
5. An equipment costs P 12,000.00. It has an estimated salvage value at the end of its life of P
1,000.00. Determine the depreciation charge during the 3rd year if it has an economical life of 5
years. Use SYD Method.
6. A company purchases an asset for P 10,000.00 and plans to keep it for 20 years. If the salvage value
is zero at the end of 20th year and using the SYD Method, what is the book value of the asset at the
end of the third year?
7. A certain company makes it a policy that for any new piece of equipment the annual depreciation
cost should not exceed 10% of the original cost at any time with no salvage or scrap value.
Determine the length of service life necessary if the depreciation method used is Sum of Year’s Digit.
8. Determine the accumulated depreciation at the end of 8 years, for an asset that costs P 15,000.00
and an estimated scrap value of P 2,000.00 at the end of 10 years. Use Matheson’s Method of
Depreciation.
9. A machine costing P 45,000.00 is estimated to have a book value of P 4,350.00 when retired at the
end of 6 years. Depreciation cost is computed using a constant percentage of the declining book
value. What is the annual rate of depreciation?

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 PAMANTASAN NG LUNGSOD NG VALENZUELA
College of Engineering and Information technology

10. A machine costs P 7,350.00 has a life of 8 years and has a salvage value of P 350.00 at the end of 8
years. Determine its book value at the end of 4 years using Constant Percentage of Declining Value.
11. A machine has an initial cost of P 50,000.00 and a salvage value of P 10,000.00 after 10 years. What
is the book value after five years using double declining balance method?
12. A P 1,000 issue of 5%, 18-year bond was sold at 85%. What is the rate of interest of this investment?
13. Shell Philippines, a multinational company, has a total gross income for a particular year of P
50,000,000. The taxable income after taking all deductions except for depletion is P 18,500,000.
What is the allowable depletion allowance for that particular year? Take percent of gross income for
oil as 22%.
14. A manufacturer produces certain items at a labor cost of P 115 each, material cost of P 76 each and
variable cost of P 2.32 each. If the item has a unit price of P 600, how many units must be
manufactured each month for the manufacturer to break even if the monthly overhead is P 428,000.
15. An item is purchased for P 25,000. Annual operation and maintenance cost are P 10,000. Using 10%,
what is the capitalized cost for a life service of 10 years?

SET B

1. The initial cost of a paint sand mill, including its installation, is P 800,000. The BIR approved life of
this mill is 10 years for depreciation. The estimated salvage value of the mill is P 50,000 and the cost
of dismantling is estimated to be P 15,000. Using the straight line method of depreciation,
determine the book value of the mill at the end of six years.
2. Engineer Ying bought an equipment for P 500,000. He spent an additional amount of P 30,000 for
installment and other expenses. The estimated useful life of the equipment is 10 years. The salvage
value is x% of the first cost. Using straight line method of depreciation, the book value at the end of
5 years will be P 291,500. What is the value of x?
3. A motor costs P 100,000.00 has an estimated life of 10 years and can be sold at P 20,000.00 at the
end of 10 years. Compute the book value at the end of 7 years using sinking fund method if i = 10%.
4. A contractor imported a bulldozer for his job, paying P 250,000.00 to the manufacturer. Freight and
insurance charges amounted to P 18,000.00; custom’s and broker’s fees, P 8,500.00; taxes, permits,
and other expenses, P 25,000.00. If the contractor estimates the life of the bulldozer to be 10 years
with a salvage value of P 20,000.00, determine the book value at the end of 6 years using sinking
fund method of depreciation at 8% interest rate.
5. A company purchases an asset for P 10,000.00 and plans to keep it for 20 years. If the salvage value
is zero at the end of 20th year and using the SYD Method, what is the depreciation charge during the
third year?
6. A certain equipment that costs P 7,000 has an economic life of “n” years and a salvage value of
P 350 at the end of “n” years. The book value at the end of 4 years is P 2,197.22. Using Sum of Years
Digital Method, compute the economic life of the equipment.
7. The original cost of a certain equipment with an economic life of 10 years is P 120,000.00. The book
value after 2 years is P 82,690.91. Using Sum-of-Year’s Digit Method of Depreciation, determine the
salvage value at the end of the life of the equipment.

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 PAMANTASAN NG LUNGSOD NG VALENZUELA
College of Engineering and Information technology

8. A machine costing P720,000.00 is estimated to have a life of 10 years. If the annual rate of
depreciation is 25%, determine the total depreciation using a constant percentage of the declining
balance method.
9. The first cost of equipment is P 600,000.00 that has a life of 10 years with a salvage value of 10% of
its first cost. Compute the book of the equipment after 5 years, using Matheson’s method of
depreciation.
10. A contractor imported a bulldozer for his job, paying P 250,000.00 to the manufacturer. Freight and
insurance charges amounted to P 18,000.00; custom’s and broker’s fees, P 8,500.00; taxes, permits,
and other expenses, P 25,000.00. If the contractor estimates the life of the bulldozer to be 10 years
with a salvage value of P 20,000.00, determine the book value at the end of 6 years using Matheson
Formula.
11. The first cost of a machine is P 1,800,000.00 with a salvage value of P 300,000.00 at the end of its
life of 5 years. Determine the book value after 3 years using Double Declining Balance Method of
Depreciation.
12. The Saudi Arabian Oil Refinery developed an oil well which is estimated to contain 5,000,000 barrels
of oil at an initial cost of $ 50,000,000. What is the depletion charge during the year where it
produces half million barrels of oil? Use Unit or Factor method in computing depletion.
13. A leasing shoe manufacturer produces a pair of Lebron James signature shoes at a labor cost of P
900.00 a pair and a material cost of P 800.00 a pair. The fixed charges on the business are P
5,000,000 a month and the variable costs are P 400.00 a pair. Royalty to Lebron James is P 1,000 per
pair of shoes sold. If the shoes sell at P 5,000 a pair, how many pairs must be produced each month
for the manufacturer to break-even?
14. An item is purchased for P 100,000. Annual cost is P 18,000. Using 8%, what is the capitalized cost of
perpetual service?
15. A 1,000,000, 8% bond pays dividend semiannually and will be redeemed at 120% on April 18, 2000.
It is bought on April 18, 1995 to yield 3% interest. Find the price of the bond.

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