Page 244 - Plant design and economics for chemical engineers

COST ESTIMATION 215
18. The total capital investment for a proposed chemical plant which will produce
$1,500,000 worth of goods per year is estimated to be $1 million. It will be necessary
to do a considerable amount of research and development work on the project
before the final plant can be constructed, and management wishes to estimate the
permissible research and development costs. It has been decided that the net profits
from the plant should be sufficient to pay off the total capital investment plus all
research and development costs in 7 years. A return after taxes of at least 12 percent
of sales must be obtained, and 34 percent of the research and development cost is
tax-free (i.e., income-tax rate for the company is 34 percent of the gross earnings).
Under these conditions, what is the total amount the company can afford to pay for
research and development?
19. A chemical processing unit has a capacity for producing 1 million kg of a product per
year. After the unit has been put into operation, it is found that only 500,000 kg of
the product can be disposed of per year. An analysis of the existing situation shows
that all fixed and other invariant charges, which must be paid whether or not the unit
is operating, amount to 35 percent of the total product cost when operating at full
capacity. Raw-material costs and other production costs that are directly propor-
tional to the quantity of production (i.e., constant per kilogram of product at any
production rate) amount to 40 percent of the total product cost at full capacity. The
remaining 25 percent of the total product cost is for variable overhead and miscella-
neous expenses, and the analysis indicates that these costs are directly proportional
to the production rate during operation raised to the 1.5 power. What will be the
percent change in total cost per kilogram of product if the unit is switched from the
l-million-kg-per-year rate to a time and rate schedule which will produce 500,000 kg
of product per year at the least total cost? All costs referred to above are on a
per-kilogram basis.
20. Estimate the total operating cost per day for labor, power, steam, and water in a
plant producing 100 tons of acetone per day from the data given in Table 22 and
using utility costs from Table 23. Consider all water as treated city water. The steam
pressure may be assumed to be 100 psig. Labor costs average $20 per employee-hour.
Electricity must be purchased. Plant operates 365 days per year.