Page 240 - Plant design and economics for chemical engineers

COST ESTIMATION 211

TABLE 27
Estimation of total product cost (showing individual components) (Continued)

C. Plant-overhead costs (SO-70% of cost for operating labor, supervision, and maintenance,
or 515% of total product cost); includes costs for the following: general plant upkeep and
overhead, payroll overhead, packaging, medical services, safety and protection, restaurants,
recreation, salvage, laboratories, and storage facilities.
II. General expenses = administrative costs + distribution and selling costs + research and
development costs
A. Administrative costs (about 15% of costs for operating labor, supervision, and maintenance,
or 2-6% of total product cost); includes costs for executive salaries, clerical wages, legal
fees, office supplies, and communications
B. Distribution and selling costs (2-20% of total product cost); includes costs for sales offices,
salesmen, shipping, and advertising
C. Research and development costs (2-5% of every sales dollar or about 5% of total product
cost)
D. Financing (interest)? (O-lo% of total capital investment)
III. Total product cost* = manufacturing cost + general expenses
IV. Grossearnings cost (gross earnings = total income - total product cost; amount of gross-
earnings cost depends on amount of gross earnings for entire company and income-tax
regulations; a general range for gross-earnings cost is 30-40% of gross earnings)

t Interest on borrowed money is often considered as a fiied charge.
$ If desired, a contingency factor can be included by increasing the total product cost by
l-5%.

NOMENCLATURE FOR CHAPTER 6

A = incremental cost of corrosion-resistant alloy materials
A, = nonmanufacturing fixed-capital investment
c, = costs for operations (not including depreciation)
C = original capital investment
C, = new capital investment
d = depreciation charge
d, = number of drawings and specifications
D = total direct cost of plant
e = total heat exchanger cost (less incremental cost of alloy)
e L = labor efficiency index in new location relative to cost of E, and ML
E = purchased-equipment cost (installation cost not included) on f.o.b. basis
Ei = installed-equipment cost (purchased and installation cost included)
EL = purchased-equipment labor cost (base)
f = lumped cost index relative to original installation cost
fi, f2 = multiplying factors for piping, electrical, instrumentation, etc.
fd = unit cost per drawing and specification
f, = unit cost for engineering
fE = current equipment cost index relative to cost of E
fF = construction or field-labor expense factor always greater than 1
f, = indirect cost factor always greater than 1