2.0 Total Cost Estimation 2.1 Bare Module / Guthrie Method: P BM BM
2.0 Total Cost Estimation 2.1 Bare Module / Guthrie Method: P BM BM
2.0 Total Cost Estimation 2.1 Bare Module / Guthrie Method: P BM BM
For grass-roots plant, costs for site preparation and development, Csite is 5% of CTBM.
𝐶𝑠𝑖𝑡𝑒 =0.05𝐶𝑇𝐵𝑀
=0.05×RM 99,963,213.32
=RM 4,998,160.67
Assume all the equipments are housed. Therefore, 20% of the total bare module cost, CTBM
will be taken into account for building costs.
𝐶𝑏𝑢𝑖𝑙𝑑𝑖𝑛𝑔𝑠 = 0.2𝐶𝑇𝐵𝑀
= 0.2× RM 99,963,213.32
=𝑅𝑀 19,992,642.67
5% of the total bare module cost, CTBM and cost of offsite utilities plant will be taken into
account for offsite facilities costs.
=RM(0.05×RM114,997,769.70)+RM 5,746,724.55
=RM 10,744,885.22
10,744,885.22)
=𝑅𝑀 160,124,704.20
2.1.3 Working Capital estimation, 𝑪𝒘𝒄
The working capital can be estimated at 15% of the total capital investment which is
also equivalent to 17.6% of the total permanent investment.
Direct manufacturing costs involves cost of raw materials, operating labor, direct
supervisory and clerical labor, utilities, maintenance and repairs, operating supplies, laboratory
charges, patents and royalties.
Based on the table X.XX, since our chemical plant are continuously operated, automatically
controlled, fluids-processing plant with a low-to-medium-capacity of 547.94 ton/day of
product, one operator/shift is assigned to each section. In the process of producing styrene, it
include feed preparation system using separation steps, reactor system, liquid separations
system and pollution abatement system. 4 operators per shift are required. Each shift, the
operator is paid for 40hr/week and 52 weeks/yr or a total of 2080 hr/yr. Therefore, the annual
cost of direct wages and benefits (DW&B) is obtained:
DW&B, RM/yr 𝑜𝑝𝑒𝑟𝑎𝑡𝑜𝑟 2080ℎ𝑟 𝑅𝑀30
=( ) (5𝑠ℎ𝑖𝑓𝑡𝑠) ( )( )
𝑠ℎ𝑖𝑓𝑡 𝑦𝑟 ℎ𝑟
3 𝑜𝑝𝑒𝑟𝑎𝑡𝑜𝑟𝑠 2080ℎ𝑟 𝑅𝑀10
=( ) (5𝑠ℎ𝑖𝑓𝑡𝑠) ( )( )
𝑠ℎ𝑖𝑓𝑡 𝑦𝑟 ℎ𝑟
2080ℎ𝑟 𝑅𝑀10
= (15 𝑜𝑝𝑒𝑟𝑎𝑡𝑜𝑟𝑠) ( )( ) = 𝑅𝑀 312000/𝑦𝑟
𝑦𝑟 ℎ𝑟
To obtain the total annual labor-related operation cost, O, direct salaries and benefits
for supervisory and engineering personnel at 15% of DW&B and operating supplies and
services at 6% of DW&B are added to DW&B. According to GFHCMHV, the average salary
of a production operater is RM 20,400/year. Hence the pay rate is RM10/hr.
Summary
In wastewater, assuming all the organic material is dissolved in the water, the flow
rate for the effluent stream is 296000 kg/yr. Given that the cost of removal for wastewater
treatment is $0.22/kg of organic at year 1995. After using cost index, the cost of wastewater
treatment is $0.39/kg of organic removed at year 2017. After converting to MYR, it is
RM1.67/kg of organic removed.
Based on the water tariff rate in Malaysia, water tariff rate in Johor for industrial
purposes is at RM3.30/m3. The purchase costs for raw material ethylbenzene is at RM
4900/ton. Therefore, the total raw material costs:
Based on section 1.3, the total utilities cost for the styrene production plant is:
RM5,746,724.55
Fixed costs are expenses which are practically independent of production rate.
Expenditures for depreciation, property taxes, insurance, financing (loan interest), and rent are
usually classified as fixed costs. These costs, except for depreciation, tend to change due to
inflation. Because depreciation is on a schedule established by tax regulations, it may differ
from year to year, but it is not affected by inflation.
2.2.2.1 Financing
Interest is considered to be the compensation paid for the use of borrowed capital. A
fixed rate of interest is established at the time the capital is borrowed. Therefore, interest is a
definite cost if it is necessary to borrow the capital used to make the investment for a plant.
Annual interest rate amount to 5 to 10% of the total value of the borrowed capital. Therefore,
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑛𝑔, 𝐶𝑓 = 0.075 × 𝐶𝑇𝐶𝐼
= 0.075 × 𝑅𝑀
= 0.075 X 188,306,652.1
=RM 14,122,998.91
2.2.2.3 Insurance
Insurance rates depend on the type of process being carried out in the manufacturing
operation and on the extent of available protection facilities. These rates amount to about 1%
of the fixed-capital investment per year.
Cost of Insurance, CInsurance = 0.01 × CTPI
= 0.01 × RM160,124,704.20
= RM 1,601,247.04
2.2.2.4 Depreciation
Depreciation is a charge to the revenue resulting from an investment in real property. It
is entirely reasonable that invested principle should be recovered by the investor and that
project revenues be charged to pay that principal. A deduction for depreciation maybe claimed
each year for property with a limited useful life that’s used in a business for income production.
Based on SIDER, by calculating the total capital depreciation, the depreciation for this
plant is calculated by the summation of the direct plant depreciation and the allocated plant
depreciation.
The total depreciation capital, CTDC = 1.18 [ CTBM + Csite + Cbuildings + Coffsite]
= RM 160,124,704.20
Cost of Manufacturing,
COM = Direct Manufacturing Cost + Fixed Cost + Plant Overhead Cost
= RM ( 461,572,704.60 + 30,682,513.60 + 20,806.80 )
= RM 492,276,024.96
Table XXX shows the Cost of Manufacture (COM) which include Direct Manufacturing
Costs, Fixed Costs and plant overhead costs, General Expenses and Total Production Costs.
Cost Equation Value (RM
million/yr)
Total Capital Invesemtemt 𝐶𝑇𝐶𝐼 188,306,652.1
Direct Manufacturing Costs
Operating Labor 𝐶𝑂𝐿 346780
Raw Materials 𝐶𝑅𝑎𝑤 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠
Utilities 𝐶𝑈𝑡𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝑪𝑫𝑴𝑪 = 𝐶𝑂𝐿 + 𝐶𝑊𝑎𝑠𝑡𝑒 + 𝐶𝑅𝑎𝑤 𝑀𝑎𝑡𝑒𝑟𝑖𝑎𝑙𝑠 𝐶𝑈𝑡𝑖𝑙𝑖𝑡𝑖𝑒𝑠
Fixed Costs
Financing 0.075 × 𝐶𝑇𝐶𝐼
Local Taxes 0.015 × 𝐶𝑇𝑃𝐼 160,124,704.20
Insurance 0.01 × 𝐶𝑇𝑃𝐼
TOTAL 0.1 × 𝐶𝑇𝐶𝐼
Plant Overhead Costs 0.06 × 𝐶𝑂𝐿
General Expenses
Administrative
Distribution and
marketing
Research and
Development
TOTAL
Cost of Manufacture 𝐶𝑂𝑀 = 𝐷𝑖𝑟𝑒𝑐𝑡 𝑀𝑎𝑛𝑢𝑓𝑎𝑐𝑡𝑢𝑟𝑖𝑛𝑔 𝐶𝑜𝑠𝑡𝑠
+𝐹𝑖𝑥𝑒𝑑 𝐶𝑜𝑠𝑡𝑠 + 𝑃𝑙𝑎𝑛𝑡 𝑂𝑣𝑒𝑟ℎ𝑒𝑎𝑑 𝐶𝑜𝑠𝑡𝑠