Page 55 - Chemical process engineering design and economics

Production and Capital Cost Estimation 41

Operating Supplies

Supplies, which are not raw materials or maintenance supplies, are considered as
operating supplies. Examples are custodial supplies, safety items, tools, column
packing, and uniforms. The cost of operating supplies will vary from 0.5 to 1% of
the fixed capital cost per year [5]. Use an average value of 0.75%.
Quality Control

Chemicals must meet certain specifications to be salable. Thus, analysis of proc-
ess steams must be regularly made to determine their quality. Although there is a
trend toward on-line analysis, samples of process streams must still be taken to
check instrument performance. Also, there are still many analyses that cannot be
made on-line. According to Peters and Timmerhaus [4] and Humphreys [5], the
cost of quality control varies from 10 to 20% of operating labor. Use a value of
20% in Table 2.1.

INDIRECT COSTS

Indirect costs are those costs incurred that are not directly related to the production
rate and consist of fixed and plant overhead costs, as shown in Figure 2.3.

Fixed Costs
During the life of a plant the production rate will vary, according to economic
conditions, but depreciation, property taxes, insurance, and rent are independent of
the production rate and will remain fixed. Instead of rent, land, which is not part of
the fixed capital cost, is assumed to be purchased by borrowed capital and the in-
terest paid yearly in the procedure outlined in Table 2.1.

Depreciation

Holland [11] has pointed out that depreciation has a number of different meanings
of which the folio whig are the most common:

1. a cost of operation
2. a tax allowance
3. a means of building up a fund to finance plant replacement
4. a measure of falling value

The value of a plant will decrease with time because of ware and technical
obsolescence. In a sense, a plant will be consumed to manufacture a product. De-
preciation determines the contribution of equipment cost to the production cost.

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