Cost+Estimation+(August23)

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


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


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


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



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 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



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 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.


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.



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.



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.


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.



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.



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.



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.



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.



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.



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

------------------------------


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


--------------------------------

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


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.


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.


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.



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%.



Laboratory Charges = 15% of Operating Labor

= (0.15) (0.054)


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.



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.



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.



Plant Overhead Cost = 50% -70% (Operating Labor + Supervision + Maintenance)

= 0.6(0.054 + 9.45 x 10-3 + 1.88)


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

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