Ch 13 Cost Estimation

Chapter13

Cost Estimation

CHAPTER 13

COST ESTIMATION

Prod Produc ucti tion on of Ammo Ammoni niaa From From Coal Coal Gasi Gasifi fica cati tion on Usin Using g Hald Haldor or Tops Topsoe oe Proc Proces esss

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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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Cost Estimation Separator

4912.6$

Recycle Compressor

9000$

13.1 Direct Cost Purchased equipment cost = E = 510023$

Installation cost (40%E) = 204009$ Instrumentation and control cost (13%E) = 66302$ Piping cost

(10% E) =51002$

Electric cost

(10%E) = 51002$

Building (including services) (29%E) = 147906$ Yard improvement (10%E) = 51002$ Land cost (6%E)

= 30601$ Total Direct Cost = 601824$

13.2 Indirect cost Engineering and Supervision Cost (32%E) = 163207$ Constriction Expenses (30%E) Contractor fee (18%E)

= 153006$

= 91804$

Contingency Cost (30%E) = 153006$ Total Indirect Cost = 561023$

13.3 Total Capital Investment Fixed Capital Investment = Direct cost + Indirect cost F.C.I

= D.C

+

I.C

F.C.I

= 601824$ + 561023$

F.C.I

= 1162847$

Working Capital (18%F.C.I) = 209312.46$ Total Capital Investment T.C.I

= Working Capital Cost + Fixed Capital Investment =

T.C.I

W.C =

+

F.C.I

1372159.46$

13.4 Product Cost

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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 Production of Ammonia From Coal Gasification Using Haldor Topsoe Process

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It is about 5 % of total product cost Research and development cost = 0.05 * 1316924.26 Research and development cost = $65846.2 13.5.4. Financing (Interest)

It is about 0-10% of total Capital Investment Consider interest is 5% of total capital investment Interest = 0.05 * 1372159.46 Interest = $68607.9 Thus; General Expenses = $253286.84 So Total product cost = Manufacturing cost + General Expenses

Total product cost = 1014031.6+ 329231 Total product cost = $1343262.6

13.6 Gross Earning/ income Wholesale selling price of AMMONIA per ton = $ 180 Total income = Selling price * Quantity of product manufactured Total income = 180 * 1600 Total income = $2880000 Gross income = Total Income – Total Product Cost Gross income = 2880000 –1343262.6 Gross income = $1536737.4 Let the Tax rate is 45% Taxes = 40% of Gross income = 0.40 * 1536737.4 Taxes = $6.14 * 105  Net profit = Gross income – Taxes = Gross income * (1- Tax rate)  Net profit = $922737.4

13.7 Rate of return Production of Ammonia From Coal Gasification Using Haldor Topsoe Process

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Rate of return = Net profit * 100/ Total Investment Rate of return = 67.2%

13.8 Break-even Analysis Data Available is given as under: Annual Fixed charges, overhead and expenses = $437740.8 Total Annual Sales = $1425000 Wholesale selling price of AMMONIA per ton = $180 Direct production Cost per ton of AMMONIA = 437740.8 * 180/ 1425000 Direct production Cost per ton of AMMONIA = $55per ton Let ‘n’ be the Break-even production rate  Number of tons needed for a break-even point is given by (437740.8) + (55* n) = (180 * n) n

= 3501.9tons/year 

Break- even Point = break- even production rate / annual production rate Break- even Point = 0.8 Years

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