Page 223 - Analysis, Synthesis and Design of Chemical Processes, Third Edition

rate. When product demand drops, production rate is reduced to less than the design capacity.
At this lower rate, we would expect a reduction in the factors making up the direct
manufacturing costs. These reductions may be directly proportional to the production rate, as
for raw materials, or might be reduced slightly—for example, maintenance costs or operating
labor.
2. Fixed manufacturing costs: These costs are independent of changes in production rate. They
include property taxes, insurance, and depreciation, which are charged at constant rates even
when the plant is not in operation.
3. General expenses: These costs represent an overhead burden that is necessary to carry out
business functions. They include management, sales, financing, and research functions. General

expenses seldom vary with production level. However, items such as research and
development and distribution and selling costs may decrease if extended periods of low
production levels occur.

The equation used to evaluate the cost of manufacture using these costs becomes:
Cost of Manufacture (COM) = Direct Manufacturing Costs (DMC) +
Fixed Manufacturing Costs (FMC) + General Expenses (GE)

The approach we provide in this chapter is similar to that presented in other chemical engineering design
texts [1, 2, 3].

The cost of manufacturing, COM, can be determined when the following costs are known or can be
estimated:
1. Fixed capital investment (FCI): (C TM or C )
GR
2. Cost of operating labor (C )
OL
3. Cost of utilities (C )
UT
4. Cost of waste treatment (C )
WT
5. Cost of raw materials (C )
RM

Table 8.2 gives data to estimate the individual cost items identified in Table 8.1 (both tables carry the
same identification of individual cost terms). With the exception of the cost of raw materials, waste
treatment, utilities, and operating labor (all parts of the direct manufacturing costs), Table 8.2 presents
equations that can be used to estimate each individual item. With each equation, a typical range for the
constants (multiplication factors) to estimate an individual cost item is presented. If no other information
is available, the midpoint value for each of these ranges is used to estimate the costs involved. It should
be noted that the best information that is available should always be used to establish these constants. The
method presented here should be used only when no other information on these costs is available.

*
Table 8.2 Multiplication Factors for Estimating Manufacturing Cost (See Also Table 8.1)