CH 13 Cost Estimation
CH 13 Cost Estimation
CH 13 Cost Estimation
CHAPTER 13
COST ESTIMATION
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Chapter13 Cost Estimation
Cost Estimation:
Before the plant to be operated, specified money must be supplied to purchase and install
the equipment. The capital needed to supply the necessary plant facilities is called fixed
capital investment while that for the operation of the plant is called the working principal
and sum of two capitals is called total capital investment.
An acceptable plant design must present a process that is capable of operating
under conditions which will yield a profit. Since, Net profit total income-all expenses
It is essential that chemical engineer be aware of the many different types of cost
involved in manufacturing processes. Capital must be allocated for direct plant expenses;
such as those for raw materials, labor, and equipment. Besides direct expenses, many
other indirect expenses are incurred, and these must be included if a complete analysis of
the total cost is to be obtained. Some examples of these indirect expenses are
administrative salaries, product distribution costs and cost for interplant communication.
Cost Estimation
TABLE 13.1: Costs of different Equipments
Equipment Cost of equipment
Gasifier 140000$
Cyclone 2400$
Waste heat boiler 9000$
Scrubber 20000$
Compressor 6371$
Shift Converter 180000$
Waste heat boiler 8000$
Compressor 7000$
Absorber 35000$
Expander 2500$
Membrane 185000
PSA 21000$
Compressor 10000$
Ammonia Converter 220000$
Partial Condenser 13000$
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Chapter13 Cost Estimation
Separator 4912.6$
Recycle Compressor 9000$
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Chapter13 Cost Estimation
Assume that the Fixed Capital Investment depreciate by straight line method for 20 years.
Assuming 5 % Salvage value at the end of plant life.
Depreciation = D = (V-VS)/N
V = F.C.I
V = 1162847$
VS = 0.05*F.C.I
VS = 58142.35$
N = no. of years = 20
D = (1162847–58142.35)/ 20
D = 55235.2$
Total Product Cost = Total Capital Investment – Depreciation
T.P.C = 1316924.26$
Fixed Charges (12%T.P.C) = 158030.9$
Direct Product Cost (55%T.P.C) = 724308.3$
Plant Overhead (10%T.P.C) = 131692.4$
Manufacturing Cost = Direct product cost + Fixed Charges + Plant Overhead Cost
Manufacturing Cost = $1014031.6
13.5 General Expenses
General Expenses = Administrative Cost + distribution and selling cost + research and
development cost
13.5.1. Administrative Cost
It is 2-6% of total product cost
Consider
Administrative cost = 5%of total product cost
Administrative cost = $65846.2
13.5.2. Distribution and Selling Cost
It includes cost for sales offices, salesmen, shipping, and advertising.
It is 2-20% of total product cost
Consider that distribution and selling costs = 15% of total product cost
Distribution and selling costs = $197538.6
13.5.3. Research and Development Cost
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Chapter13 Cost Estimation
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