cost+estimation+(august23)
TRANSCRIPT
COST
ESTIMATION
150
Introduction
Cost estimation is another very essential part of a plant design. A designer or a
chemical engineer must be aware and updated of a many different types of cost involve in
the manufacturing process what he is designing. Under this topic, we tabulated different
cost analysis such as the direct plant expenses or direct cost and indirect expenses. The
components under direct cost expenses are raw materials cost, labor cost, installation cost
and equipment cost. Likewise, under indirect cost are such administrative, salaries
production cost and cost for interplant communication.
As part of this project, it is a must that our capital to invested should be very
visible for it is a necessity for any industrial processes, the components of the capital
investment for any given process design are the fixed capital investment for physical
equipment and facilities in the plant plus the working capital which must be available for
the salaries, to keep raw materials and products on hand, and to handle other special
items requiring cash outlay. Thus, under cost estimation of our process, capital
investment cost, manufacturing cost and general expenses including the income tax were
all taken into consideration.
The resulting amount of our total cost production is Php120.79 /kg. The working capital is estimated to be Php 998,057,080 and the rest will comprise the FCI amounting to Php2,564,990,950. The total capital investment is estimated Php3,562,967,030.
Since, our total production cost is Php113.25 /kg and that our projected selling
price is Php288/kg which is plant is operating at 65% capacity. As a consequence, it is
visible that we will be having a profit of Php8,427,384,000 /yr.
151
Cost Estimation
Summary of Assumptions and References
Assumptions
1. A delivery allowance of 25% of the purchased equipment cost was applied based
from page 244 of Plant Design and Economics for Chemical Engineers by Peters
and Timmerhaus.
2. Dollar (US$) exchange rate as of August, 2009 : 1$ = 48.00 Php
3. Marshall and Swift Cost Index from the chemical engineering journal, January
2006 issue:
MSI 1990 = 904.2
MSI 2002 = 1104.2
MSI 2006 = 1294.6
I. ESTIMATION OF TOTAL CAPITAL INVESTMENT
152
Plant Capacity: 7,000 kg/hour
Plant Operation: 300 days/year at 24 hours/day
Dollar Exchange: $1 = Php 48.00
Direct Cost
Exhibit Cost, Php % TCI
Purchased Equipment – delivered A 463,381,274.4 16
Purchased-equipment installation B 217,789,199 7.5
Instrumentation and Controls (installed) C 83,408,629.39 2.9
Piping (installed) D 305,831,641.1 10.6
Electrical Systems (installed) E 50,971,940.18 1.6
Land and Buildings (including services) F 420,000,000.00 26.5
Yard Improvements G 46,338,127.44 1.6
Service Facilities (installed) H 342,366,892.1 11.22
TOTAL DIRECT COST 1,930,087,704
Indirect Cost
Exhibit Cost, Php % TCI
Engineering and Supervision J 152,915,820.6 5.3
Construction expenses K 189,986,322.5 6.6
Contractor’s Fee K 97,310,067.62 3.4
Contingency L 194,620,135.2 6.7
TOTAL INDIRECT COST Php 634,832,345.9
Fixed Capital Investment
153
Exhibit Cost, Php % TCI
Total Direct Cost 1,930,087,704 78.05
Total Indirect Cost 1-O 634,832,345.9 21.95
FIXED CAPITAL INVESTMENT 1-P 2,564,910,950 100
Total Capital Investment
Exhibit Cost, Php % TCI
Fixed Capital Investment 1-P 2,564,910,950 28.2
Total Working Capital M 998,056,080 71.8
TOTAL CAPITAL INVESTMENT 1-R 3,562,967,030 100
II. ESTIMATION OF TOTAL PRODUCT COST
154
Plant Capacity: 7,000 kg/hour
Plant Operation: 300 days/year at 24 hours/day
Dollar Exchange: $1 = Php 48.00
I. TOTAL MANUFACTURING COST
Exhibit Cost, Php/kg % TPC
A. Direct Production Cost
Raw Materials AA78.49
90.78%
Operating Labor BB0.054
0.0616%
Direct Supervisory & Clerical Labor CC0.00945
0.0108%
Utilities DD0.51475
0.5869%
Maintenance and Repairs EE1.89
2.1549%
Operating Supplies FF0.28
0.3192%
Laboratory Charges GG0.0081
0.0092%
B. Fixed Charges
Depreciation HH0.51
3.5915%
Local Taxes II1.27
0.9007%
Property Insurance JJ0.356
0.2508%
TOTAL FIXED CHARGES2.136
C. Plant Overhead Cost KK1.172 1.34%
TOTAL MANUFACTURING COST 84.55 100%
Total ProductionCost= Manufacturing cost70 %
Total ProductionCost=84.550.7
=PhP120.79kg H 2
155
II. GENERAL EXPENSES
A. Administrative Cost 2-L 0.3907 1.31
B. Sales and Marketing 2-L 22.65 78.95
C. Research and Development 2-L 5.6625 19.74
TOTAL GENERAL EXPENSES 2-L 28.45 100
III. TOTAL PRODUCT COST
Total Manufacturing Cost84.55 74.67
General Expenses 2-L 28.45 25.33
TOTAL PRODUCT COST 2-L 113.25 100
Exhibit A
156
Purchased Equipment
Cost indexingof equipment=cost of eqpt on time A [ cost index presentcost index time A ]
From Chemical Eng’g Magazine, Marshall and Swift Index (Oct 2008)
Cost index at 2008 (all industries) = 1373.3
Cost index at 2002 (all industries) = 1104.2
Total Cost of Delivered Equipment
Equipment
Name
Equipment
Code
Schedul
e
No. of
Units
Total Cost,
Php
Flame
Reactor
F-1 1 1 354,038,987.3
Quencher Q-1 2 1 8,668,633.40
Scrubber E-2 3 1 28,482,639.01
CO-Shift
Converter
N-1 4 1 67,696,350.99
Pressure-
Swing
Adsorber
A-1 5 2 4,494,663.71
Total 463,381,274.4
Total Purchased Equipment=Total Price of Equipment0.50
=463,381,274.00.50
=¿926,762,549.6
Total Purchased Equipment Cost = 463,381,274.4
157
Schedule No. 1
Equipment Cost of J-1
Name of Equipment: Flame Reactor
Material of Construction: Wrought Austenitic Stainless Steel AISI type 316
Capacity: 378.31 m3 ≈ 99,938.9 gal
Price at 1990: $105000
(Fig. from PD & Economics for ChE by P& T 4th Ed Fig 16.35 p. 731)
Cost at 2006=$105000 [ 103
200 ]0.56
[ 1302.3904.2 ] [ 99,938.9
103 ]0.6
¿ $5,900,649.788×Php 48
1$=¿ Php 283,231,189.8
Delivered allowance of 25% of the purchased
Delivered cost= (0.25 ) (283,231,189.8 )=Php70,807,797.46
TotalCost of Eqpt=194,944,297.6+48,736,074.41=Php354,038,987.3
158
Schedule No. 2
Equipment Cost of Q-1
Name of Equipment: Quencher
Material of Construction: SS-316
Capacity: 15500.65m3
Price at 2002: $ 122,500
(From Fig. PD and Eco for ChE P & T 5th Ed Fig. 15-34 p. 848)
Cost at 2006=$122,500 [ 1302.31104.2 ]
¿ $144,477.22×Php48$1
=Php6,934,906.72
Delivered allowance of 25% of the purchased
Delivered cost= (0.25 ) (6,934,906.72 )=Php1,733,726.68
Total cost of eqpt=6,934,906.72+1,733,726.68=Php8,668,633.4
159
Schedule No. 3
Equipment Cost of E-1
Name of Equipment: Scrubber
Material of Construction: SS-304 Diameter: 3.35 m
Capacity: 80.79 m3 Height: 4.15 m
Price of column w/o tray at 2002: $ 400,000 Actual trays:5 stages
(From PD and Eco for ChE P & T 5th Ed)
cost at 2006=$400,000 [ 1302.31104.2 ]
(assume sieve trays SS )=$ 471,762.36×Php48$1
=Php22,644,593.37
Purchase cost at 2002 = $ 2,500
cost at 2006=$2500[ 1302.31104.2 ]=$2948.29×
Php 48$1
=Php141517.84
Delivered allowance of 25% of the purchased
delivered cost=(0.25 ) (22,644,593.37+141577.84 )=Php5,696,527.80
Total cost of eqpt=22,644,593.37+141,517.84+5,696,527.80=Php28,482,639.01
Schedule No. 4
160
Equipment Cost of N-1
Name of Equipment: CO-Shift Converter
Material of construction: Wrought Austenitic Stainless Steel AISI type 316
Capacity: 24 m3 ≈ 6340.13 gal
Price at 1990: $105,000
(From PD and Eco for ChE P&T 5th Ed fig. 13-15 p.628)
Cost at 2006=$105000 [ 103
200 ]0.56
[ 1302.3904 ] [ 6340.13
103 ]0.6
¿ $1128272.516×Php48$1
=Php54,157,080.79
Delivered allowance of 25% of the purchased
Delivered cost= (0.25 ) (541,57,080.79 )=Php13,539,270.2
Total cost of eqpt=54,157,080.79+13,539,270.2=Php67,696,350.99
Schedule No. 5
161
Equipment Cost of A-1
Name of Equipment: Pressure-Swing Adsorber
Material of construction: SS-304
Capacity: 17416.33gal
Price at 1990: 26000
(From fig. 12-53 chap. 12; p.558 P&T 5th Edition)
cost at 2006=$26,000[ 1302.3904 ]=$37455.53×
Php 48$ 1
=Php1797865.487
Delivered allowance of 25% of the purchased
Delivered cost= (0.25 ) (1797865.487 )=Php449466.37
No. of units required: 2
Total cost of eqpt=Php (1797865.487+449466.37 ) 2=Php4494663.71
162
Exhibit B
Purchased Equipment Installation
Process equipment installation involves labor, foundations, supports, platforms,
construction expenses and other factors directly related for the setting up of purchased
equipment.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition page 244. Average value for the % installation cost is utilized for
the equipment installation cost.
Type: Fluid-Fluid Processing Plant
Purchased Equipment Installation Cost:
Purchased eqpt installation=47 %of delivered eqpt
Cost of installation=0.47¿463,381,274.4)
Cost of installation=PhP 217,789,199
163
Exhibit C
Instrumentation and Process Control
Instrumentation costs, installation labor costs and expenses for auxiliary
equipment and material constitute the major portion of the capital investment required for
the instrumentation.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Instrumentation∧ProcessControl Cost=18 %Delivered Eqpt Cost
Instrumentation∧ProcessControl Cost= (0.18 ) ¿463381274.4)
Instrumentation∧ProcessControl Cost=Php83,408,629.39
Exhibit D
164
Piping Costs
Piping covers labor charges, valves, fittings, pipe, supports and other items
involved in the complete set-up of al piping system directly used in the process.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
PipingCost=66 %of delivered eqpt cost
PipingCost=0.66 (463,381,274.4 )
PipingCost=Php305,831,641.1
165
Exhibit E
Electrical Systems
The electrical systems consist of four major components namely power, wiring,
lighting, transformation and service and instrument and control wiring.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Electrical eqpt cost=11 %delivered eqpt cost
Electrical eqpt cost=(0.11 ) (463,381,274.4 )
Electrical eqpt cost=Php50,971,940.18
166
Exhibit F
Land and Buildings
The cost of building, including services, consists of expenses for labor materials
and supplies involved in the establishment of all buildings connected with the plant. Cost
for plumbing, heating, lighting, ventilation and similar building services included.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9, page 251.
Price of land and Buildings = Php 25,000/m2
Land Area Estimation (100 m2 for every 1000 kg product/day)
kg H 2
dayproduced=7000 kg
hr×
24 hrs1day
=168,000kg H 2
day
Estimated land area=(100m2×
168,000kgday
)
1000kgday
=16,800m2
Cost of land∧buildings=16,800m2×Php25,000
m2=Php420,000,000
167
Exhibit G
Yard Improvements
Costs for fencing, grading, roads, sidewalks, railroad sidings, landscaping and
similar items are all considered part of yard improvements.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Yard Improvement Cost=10 %delivered eqpt cost
Yard Improvement Cost=0.10 (463,381,274.4 )
Yard Improvement Cost=Php46,338,127.44
168
Exhibit H
Service Facilities
Utilities for supplying steam, water, power, compressed air and fuel are part of the
service facilities of a chemical process plant.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Service facility cost=70 %delivered eqpt cost
Service facility cost=0.70 (463,381,274.4 )
Service facility cost=Php 342,366,892.1
169
Exhibit I
Engineering and Supervision
The cost for construction design and engineering including internal or licensed
software, computer aided drawings, purchasing, accounting, construction, cost
engineering, travel, communications, and home office expense plus overhead, constitute
the capital investment for engineering and supervision.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Engineering∧Supervision cost=33 % delivered eqpt cost
Engineering∧Supervision cost=0.33 ( 463,381,274.4 )
Engineering∧Supervision cost=Php152,915,820.6
170
Exhibit J
Construction Expenses
Another indirect plant cost s the item of construction or field expense and
includes temporary construction and operation, construction tools and rentals, home
office personnel located at the construction site, construction payroll, travel and living,
taxes and insurance and other construction overhead.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Construction expenses cost=41 % deliveredeqpt cost
Construction expenses cost=0.41 (463,381,274.4 )
Construction expenses cost=Php189,986,322.5
171
Exhibit K
Contractor’s Fee
Contractor’s fee varies for different situations but around 21% of delivered
equipment is approximated to be the equivalent.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Contracto r ' s fee=21 % deliveredeqpt cost
Contracto r ' s fee=0.21 (463,381,274.4 )
Contracto r ' s fee=Php97,310,067.68
172
Exhibit L
Contingencies
Contingency is included as the smallest amount of capital investment in
anticipation of some unexpected and inevitable changes that may tend to increase the cost
of the project.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Table 6-9 page 251.
Contingency=42% delivered eqpt cost
Contingency=0.42 (463,381,274.4 )
Contingency=Php194,620,135.2
173
Exhibit M
Working Capital Cost
The working capital cost is the summation of the cost of raw materials, utilities
and operating labor cost for 60 days.
Working capital=(raw material+utilities+labor ) for 60days
Working capital=(19.62+0.1287+0.054 )( 50400000kg H 2
yr ) ¿998056080( 1 yr
300days )(75 days)
Working capital=Php249,514,020 for 75 days
174
Exhibit 1-O
Total Indirect Cost
The total indirect cost is the summation of the engineering and supervision,
construction expenses, legal expenses, constructor’s fee and contingency.
COST, PhP
Engineering and Supervision 152915820.6
Construction Expenses 189986322.5
Constructor’s Fee 97310067.62Contingency 194620135.2
------------------------------
TOTAL INDIRECT COST Php 634,832,345.9
175
Exhibit 1-P
Fixed Capital Investment Cost
The fixed capital investment cost is the summation of total direct and indirect
cost.
TOTAL DIRECT COST Php 1,930,087,704
TOTAL INDIRECT COST Php 934,832,345.9
--------------------------------
FIXED CAPITAL INVESTMENT COST Php 2,564,910,950
176
Exhibit 1-Q
Working Capital Cost
The working capital cost is the summation of the cost of raw materials, utilities
and operating labor for 3 months.
Cost Tabulation of Raw MaterialsRaw Materials Quantity
(3 mos)
(kg/yr)
Cost
(Php/kg)
Total Cost
(Php/kg H2)
Heavy Fuel Oil 163029240 6 19.5
Iron Oxide (Fe2O3) 643 686 0.05485
Activated Carbon 38458.56 90 0.06875
Total Raw Material Cost 19.62/kg H2
A. RAW MATERIALS
1 year = 4 quarters
1 quarter = 3 months
1. Heavy Fuel Oil:
Amount of Heavy Fuel Oil needed = 652,116,960 kg/yr
Price of Heavy Fuel Oil = Php 6.00/kg
= (652116960 kg HFO/yr) (Php 6/kg HFO) (1yr/5.04X107kg H2)
= Php77.8
4 quarters= Php 19.5/kg H2
2. Iron Oxide (Fe2O3)
Amount of Iron Oxide = 8061 kg/150 operating days (300 operating days/1yr)
= 16122 kg/yr
Price of Iron Oxide = 16122 kg/yr (Php 686/kg) (1yr/50400000kg H2)
177
= P0.2194 /kg H 2
4 qrt = PhP 0.05485/kg H2
3. Carbon Molecular Sieve:
Amount of Carbon Molecular Sieve = 38458.56 kg/bed (2 beds) = 76917.12 kg
= 76917.12 kg/300 operating days (300 operating days/yr)
= 923005.44 kg/yr
Price of Activated Carbon =Php 90/kg
=923005.44 kg/yr (Php 90/kg)( 1yr/50400000kg H2)
=Php0.275 /kg
4qrt = PhP 0.06875/kg H2
Total Raw Material Cost = Php19.6/kg H2
B. UTILITIES
1. Cooling Water
Cost of H2O from Maynilad as of March 2009
1m3 = Php 16.5
Cost of H2O = Php 16.5/m3 (m3/1000kg)
= Php 0.0165/kg
Flame Reactor:
Water Supplied = 36707.8 kg/hr = 26429660 kg/yr
Cost of Water Supplied = 26429660 kg/yr (Php 0.0165/kg) (1yr/50400000kg H2)
= Php0.00865 /kg H 2
4 qrt=¿ Php 0.0021625/kg H2
Quencher:
Water Supplied = (61019.439 kgH2O/ hr) = 439339960.8kg/yr
Cost of Water Supplied = 439339960.8 kg/yr (Php 0.0165/kg)(1yr/50400000kg H2)
178
= Php0.1438 /kg H 2
4 qrt=¿Php 0.03595/kg H2
Scrubber:
Water Supplied = 153681.93 kg H2O/hr = 1106509896 kg/yr
Cost of Water Supplied = 1106509896 kg/hr (Php 0.0165/kg) (1yr/50400000kg H2)
= Php0.3623 /kg H 2
4 qrt=¿Php 0.090575/kg H2
Total cost of water = Utilities = P 0.51475/kg H2
C.OPERATING LABOR
Minimum wage as of March 2009 = P 47.75/hr
No. of processing step = 5
Operating labor = 38 employee-hr/day-processing step
(Fig. 6-9 P & T 5th Edition p. 265)
Operating Labor Cost = P 47.75/hr (38 employee-hr/day-p.s. step) (300days/1yr) ( 5 p.s.)
(1yr/50400000kg H2) = Php 0.054/kg product
Php 19.80/kg product
Php19.80/kg product ×50400000kg H 2/ yr= Php 998,056,080
TOTAL WORKING CAPITAL COST Php 998,056,080
179
Exhibit 1-R
Total Capital Investment Cost
The total capital investment cost is the summation of fixed capital investment and
the working capital cost.
TOTAL WORKING CAPITAL COST Php 998,056,080
FIXED CAPITAL INVESTMENT COST Php 2,564,910,950
---------------------------
TOTAL CAPITAL INVESTMENT COST Php 3,562,967,030
180
Cost Estimation
PART II
Exhibit 2-A
Raw Materials
The raw materials are those which are directly consumed in making the final
product including both the major and minor materials
Cost Tabulation of Raw MaterialsRaw Materials Quantity
(kg/yr)
Cost
(Php/kg)
Total Cost
(Php/kg H2)
Heavy Fuel Oil 65,211,690 6 77.8
Iron Oxide (Fe2O3) 16,122 686 0.219
Activated Carbon 153,834.24 90 0.275
Total Raw Material Cost = 78.49/kg H2
Basis : 1 year = 300 days
$1 = Php 48
1. Heavy Fuel Oil:
Amount of Heavy Fuel Oil needed = 652,116,960 kg/yr
181
Price of Heavy Fuel Oil = Php 6.00/kg
= (652116960 kg HFO/yr) (Php 6/kg HFO) (1yr/5.04X107kg H2)
= Php 77.8 = Php 78/kg H2
2. Iron Oxide (Fe2O3)
Amount of Iron Oxide = 8061 kg/150 operating days (300 operating days/1yr)
= 16,122 kg/yr
Price of Iron Oxide = 16,122 kg/yr (Php 686/kg) (1yr/50400000kg H2)
= P 0.219/kg H2
3. Carbon Molecular Sieve:
Amount of Carbon Molecular Sieve = 461502.72 kg/bed (2 beds) = 923005.44 kg
= 923005.44 kg/300 operating days (300 operating days/yr)
= 923005.44 kg/yr
Price of Activated Carbon =Php 90/kg
=923005.44 kg/yr (Php 90/kg)( 1yr/50400000kg H2)
=Php 1.65/ kg
Total Raw Material Cost = Php 78.49/kg H2
182
Exhibit 2-B
Operating Labor
Operating labor is divided by two types, skilled and unskilled labor.
Minimum wage as of March 2009 = P 47.75/hr
No. of processing step = 5
Operation = 300 days/ year
Average Condition
Plant Capacity = 7000 kg/hr
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Figure 6-9 page 265.
Operating labor = 38 employee-hr/day-processing step
(Fig. 6-9 P & T 5th Edition p. 265)
Operating Labor Cost = P 47.75/hr (38 employee-hr/day-processing step) (300days/1yr) (
5 pcs.) ((1yr/50400000kg H2)
= Php 0.054/kg product
Operating Labor for average conditions:
OL = 38 emp-hrs/day/processing step
Operating Labor required = 38 x 9 x 365= 124,830 emp-hrs/yr
Therefore for 1 yr:
183
OL= 124,830 emp-hrs/yr x 50= Php 6,241,500/yr
Exhibit 2-C
Direct Supervisory and Clerical Labor
Direct supervision and clerical assistance is always required for a manufacturing
operation. This amount of labor is closely related to the total amount of operating labor,
complexity of the operation and product quality standards.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition Figure 6-18 page 273.
Direct Supervisory and Clerical Labor = 17.5% Operating Labor
= 0.175(0.054)
= Php 9.45 x 10-3 / kg Product
184
Exhibit 2-D
Utilities
The cost of utilities such as steam, electricity, process and cooling water,
compressed air, natural gas, fuel oil, refrigeration and waste treatment and disposal varies
widely depending on the amount needed, plant location and source. The utility
requirements are determined from material and energy balances calculated for the
process.
As cited in Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition page 267, utility cost for ordinary chemical processes amount to
10-20% of the total product cost.
1. Cooling Water
Cost of H2O from Maynilad as of March 2009
1m3 = Php 16.5
Cost of H2O = Php 16.5/m3 (m3/1000kg)
= Php 0.0165/kg
Flame Reactor:
Water Supplied = 36707.8 kg/hr = 26429660 kg/yr
185
Cost of Water Supplied = 26429660 kg/yr (Php 0.0165/kg) (1yr/50400000kg H2)
= Php 0.00865/kg H2
Quencher:
Water Supplied = (61019.439 kgH2O/ hr) = 439339960.8kg/yr
Cost of Water Supplied = 439339960.8 kg/yr (Php 0.0165/kg)(1yr/50400000kg H2)
= Php 0.1438/kg H2
Scrubber:
Water Supplied = 153681.93 kg H2O/hr = 1106509896 kg/yr
Cost of Water Supplied = 1106509896 kg/hr (Php 0.0165/kg) (1yr/50400000kg H2)
= Php 0.3623/kg H2
Total cost of water = Utilities = Php 0.51475/kg H2
186
Exhibit 2-E
Maintenance and Repairs
Annual cost for equipment maintenance and repairs may range from 2 to 20% of
equipment cost.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 273.
Maintenance and Repair = 6% FCI
= (0.06 )(1,575,222,796)
50400000 ¿ Php1.88/kg product
187
Exhibit 2-F
Operating Supplies
Charts, lubricants, test chemicals, custodial supplies and similar supplies cannot
be considered as raw materials or maintenance and repair materials and these are
classified as operating supplies.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 273.
Operating Supplies = 15% Maintenance and Repair
= (0.15)(1.88)
= Php 0.28/kg H2O
188
Exhibit 2-G
Laboratory Charges
The cost of laboratory test for control of the operations and product quality
control is covered in this cost accounting portion. It is generally calculated by estimating
the employee hours involved and multiplying it to 10-20%.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 273.
Laboratory Charges = 15% of Operating Labor
= (0.15) (0.054)
= Php 0.0081/kg product
189
Exhibit 2-H
Depreciation
Equipment, buildings and other material objects comprising a manufacturing plant
require an initial investment that must be paid back, usually in the form of charging
depreciation as production expense.
Using Straight Line Method
D= P−LN
¿ FCI−010
¿ 2,564,910,950−010
¿ 25,649,109.5yr ( 1 yr
50400000kg product )
¿ Php0.51/kg product
190
Exhibit 2-I
Local Taxes
Magnitude of local property taxes depends on the particular locality of the plant
and the regional laws.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 273.
Local Taxes = 2.5%FCI
= 0.025 (2,564,491,950 )
50400000
¿ Php1.27/kg product
191
Exhibit 2-J
Property Insurance
Insurance rates depend on the type of process being carried out in the
manufacturing operation and on the extent of available protection facilities.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 273.
Property Insurance = 0.7% FCI
FCI = Php 2,564,910,950
0.7% FCI = 0.007(2,564,910,950)
Property Insurance = 0.007 (Php 2,564,910,950)/50,400,000
= Php 0.356/kg H2
192
Exhibit 2-K
Plant Overhead Cost
Many other expenses are always involved if the complete plant is to function as
an efficient unit .Expenditures required for routing plant services are included in the plant
overhead costs. Non-manufacturing machinery, equipment and buildings are necessary
for many of the general plant services and the fixed charges and direct costs for these
items are part of the plant overhead costs.
From Plant Design and Economics for Chemical Engineers by Peters and
Timmerhaus, 5th Edition, Figure 6-18 page 274.
Plant Overhead Cost = 50% -70% (Operating Labor + Supervision + Maintenance)
= 0.6(0.054 + 9.45 x 10-3 + 1.88)
= Php 1.16/kg product
193
Exhibit 2-L
General Expenses
General expenses constitutes mainly of indirect cost on production. It includes
Administrative Costs, Product distribution and as well as expenses for Research and
development.
From Plant Design and Economics by Peters and Timmerhaus, General expenses
comprises for the 15-25% of the total product cost,
Type: Fluid-Fluid processing Plant
General Expenses = Admin. Cost + Sales and Marketing Cost + R & D Cost
TPC=MFGcost+GenExpenses
¿ Php84.55kg H 2
+ Php0.3907kg H 2
+0.2TPC+0.05TPC
TPC = Php 113.25/kg H2
1. Administrative Cost
= 20% (O.L. + DS&CL + M&R)
194
= 0.2(2,721,750 + 476,280 + 94,752,000) /50,400,000
= Php 0.3907/kg H2
2. Sales and Marketing
= 20% TPC
= 0.2(113.25/kg H2)
= Php 22.65/kg H2
3. Research and Development
= 5% TPC
= 0.05 (113.25/kg H2)
= Php 5.6625/kg H2
Total General Expenses = Php 29.7571/kg H2
195
Exhibit 2-M
Total Variable Cost
The total direct product cost is the summation of raw materials, operating labor,
direct supervisory and clerical, utilities, maintenance and repair, operating supplies and
laboratory charges.
Raw Materials 78.49
Operating Labor 0.054
Direct Supervisory and Clerical Labor 0.00945
Utilities 0.51475
Maintenance and repairs 1.88
Operating Supplies 0.28
Laboratory Charges 0.0081
--------- ------------------------
TOTAL VARIABLE COST Php 81.2463
196
Exhibit 2-N
Total Fixed Cost
The total fixed capital cost is the summation of depreciation, local taxes, and
property insurance.
Depreciation 0.51
Local Taxes 1.27
Property Insurance 0.356
Plant Overhead Cost 1.172
General Expenses 38.45
-----------------------------------
TOTAL FIXED COST Php 35.758/kg H2
197
Cost Estimation
PART III
Economic Evaluation
The economic evaluation depends on the rate of investment and the
quantity a B.E.P. It will help us to know if or plant will earn or the opposite of it.
A. Rate of Return
ROI is also known as rate of profit. It also refers to the monetary amount of gain
or loss, the return on a past or current investment, or the estimated return on a future
investment.
% ROI = Total Profit/TCI
From Plant Design and Economics from Chemical Engineers by Peters and
Timmerhaus, 5th edition page 223
Total Cost = FCI + Working Capital
FCI = 2,564,910,950Working Capital = 998,056,080Total Cost = 3,562,967,030
198
Assumption: 50% increases in TPC
TPC= 113.25 x 1.5 = Php 169.88/ kg H2
Annual Profit = Q (USP –T PC)
Where:
Q = Capacity (Amount produced)
USP = Unit selling price
PC = Product Cost
Annual Profit=50,400,000kg H 2
yr ( Php288kg H 2
−Php120.79kg H 2 )=Php8,427,384,000/ yr
TCI = Php 3,562,967,030
% ROI = (8,427,384,000/ 3,562,967,030) X 100 = 236.52 %
B. BREAK EVEN POINT
Q = FC / (Up – VC)
Q = break even point, i.e., units of production
FC = fixed costs
VC = variable cost per unit
Up = unit selling price
FIXED COSTS = Php 31.758 X 504000 = Php 1,600,603,200
199
VARIABLE COSTS = Direct Production Cost
= Php 81.2463/kg H2
UNIT SELLING PRICE = Php 288 /kg H2
BEP = 1,600,603,200/ (288 – 81.2463)
BEP = 7,741,593.984 kg product
%BEP = (7,741,593.984 / 50,400,000) (100)
%BEP = 15.36 %
200