Cost Estimation (August23)

150
COST
ESTIMATION

151

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 Php /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 Php /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 Php /yr.

152

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

153

I. ESTIMATION OF TOTAL CAPITAL INVESTMENT

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
Contractors Fee K 97,310,067.62 3.4
Contingency L 194,620,135.2 6.7
TOTAL INDIRECT COST Php 634,832,345.9

154

Fixed Capital Investment
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

155

II. ESTIMATION OF TOTAL PRODUCT COST

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 AA
78.49
90.78%
Operating Labor BB
0.054
0.0616%
Direct Supervisory & Clerical Labor CC
0.00945
0.0108%
Utilities DD
0.51475
0.5869%
Maintenance and Repairs EE
1.89
2.1549%
Operating Supplies FF
0.28
0.3192%
Laboratory Charges GG
0.0081
0.0092%
B. Fixed Charges
Depreciation HH
0.51
3.5915%
Local Taxes II
1.27
0.9007%
Property Insurance JJ
0.356
0.2508%
TOTAL FIXED CHARGES
2.136

C. Plant Overhead Cost KK
1.172 1.34%

TOTAL MANUFACTURING COST
84.55
100%

Total Piouuction Cost
Nanufactuiing cost

Total Piouuction Cost
PhP
kg B

156

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 Cost
84.55 74.67
General Expenses 2-L 28.45 25.33
TOTAL PRODUCT COST 2-L 113.25 100

157

Exhibit A
Purchased Equipment

Cost inuexing of equipment cost of eqpt on time A
cost inuex piesent
cost inuex time A

From Chemical Engg 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
Schedule 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 Puichaseu Equipment

926,762,549.6

Total Purchased Equipment Cost = 463,381,274.4

158

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 m
3
99,938.9 gal

Price at 1990: $105000

(Fig. from PD & Economics for ChE by P& T 4
th
Ed Fig 16.35 p. 731)

Cost at
Php 283,231,189.8

Delivered allowance of 25% of the purchased

Beliveieu cost Php 70,807,797.46

Total Cost of Eqpt 354,038,987.3

159

Schedule No. 2

Equipment Cost of Q-1

Name of Equipment: Quencher

Material of Construction: SS-316

Capacity: 15500.65m
3

Price at 2002: $ 122,500

(From Fig. PD and Eco for ChE P & T 5
th
Ed Fig. 15-34 p. 848)

Cost at

Php
Php


Beliveieu cost Php

Total cost of eqpt

160

Schedule No. 3

Equipment Cost of E-1

Name of Equipment: Scrubber

Material of Construction: SS-304 Diameter: 3.35 m

Capacity: 80.79 m
3
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 5
th
Ed)

cost at

assume sieve tiays SS
Php

Php

Purchase cost at 2002 = $ 2,500

cost at

Php

Php


ueliveieu cost Php

Total cost of eqpt

161

Schedule No. 4

Equipment Cost of N-1

Name of Equipment: CO-Shift Converter

Material of construction: Wrought Austenitic Stainless Steel AISI type 316

Capacity: 24 m
3
6340.13 gal

Price at 1990: $105,000

(From PD and Eco for ChE P&T 5
th
Ed fig. 13-15 p.628)

Cost at

Php

Php


Beliveieu cost Php

Total cost of eqpt

162

Schedule No. 5

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 5
th
Edition)

cost at

Php

Php


Beliveieu cost Php
No. of units required: 2
Total cost of eqpt Php

163

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, 5
th
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:

Puichaseu eqpt installation of ueliveieu eqpt

Cost of installation 463,381,274.4)

Cost of installation 217,789,199

164

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, 5
th
Edition Table 6-9 page 251.

nstiumentation anu Piocess Contiol Cost Beliveieu Eqpt Cost

nstiumentation anu Piocess Contiol Cost 463381274.4)

nstiumentation anu Piocess Contiol Cost 83,408,629.39

165

Exhibit D

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.

Timmerhaus, 5
th

Piping Cost of ueliveieu eqpt cost

Piping Cost

Piping Cost 305,831,641.1

166

Exhibit E

Electrical Systems

The electrical systems consist of four major components namely power, wiring,
lighting, transformation and service and instrument and control wiring.

Timmerhaus, 5
th

Electiical eqpt cost ueliveieu eqpt cost

Electiical eqpt cost

Electiical eqpt cost 50,971,940.18

167

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, 5
th
Edition Table 6-9, page 251.

Price of land and Buildings = Php 25,000/m
2

Land Area Estimation (100 m
2
for every 1000 kg product/day)

kgB
uay
piouuceu
kg
hi

his
uay

kgB
uay

Estimateu lanu aiea
m

kg
uay

kg
uay
m

Cost of lanu anu builuings m

168

Exhibit G

Yard Improvements

Costs for fencing, grading, roads, sidewalks, railroad sidings, landscaping and
similar items are all considered part of yard improvements.

Timmerhaus, 5
th

aiu mpiovement Cost ueliveieu eqpt cost

aiu mpiovement Cost

aiu mpiovement Cost 46,338,127.44

169

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.

Timmerhaus, 5
th

Seivice facility cost ueliveieu eqpt cost

Seivice facility cost

Seivice facility cost 342,366,892.1

170

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.

Timmerhaus, 5
th

Engineeiing anu Supeivision cost ueliveieu eqpt cost

Engineeiing anu Supeivision cost

Engineeiing anu Supeivision cost 152,915,820.6

171

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.

Timmerhaus, 5
th

Constiuction expenses cost ueliveieu eqpt cost

Constiuction expenses cost

Constiuction expenses cost 189,986,322.5

172

Exhibit K

Contractors Fee

Contractors fee varies for different situations but around 21% of delivered
equipment is approximated to be the equivalent.

Timmerhaus, 5
th

Contiactoi
s fee ueliveieu eqpt cost

Contiactoi
s fee

Contiactoi
s fee 97,310,067.68

173

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.

Timmerhaus, 5
th

Contingency ueliveieu eqpt cost

Contingency

Contingency 194,620,135.2

174

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.

oiking capital iaw mateiial utilities laboifoi uays

oiking capital
kgB
yi

uays

oiking capital Php 249,514,020 for 75 days

175

Exhibit 1-O

Total Indirect Cost

The total indirect cost is the summation of the engineering and supervision,
construction expenses, legal expenses, constructors fee and contingency.

COST, PhP

Engineering and Supervision 152915820.6
Construction Expenses 189986322.5
Constructors Fee 97310067.62
Contingency 194620135.2
------------------------------


176

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

177

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 Materials
Raw Materials Quantity
(3 mos)
(kg/yr)
Cost
(Php/kg)
Total Cost
(Php/kg H
2
)
Heavy Fuel Oil 163029240 6 19.5
Iron Oxide (Fe
2
O
3
) 643 686 0.05485
Activated Carbon 38458.56 90 0.06875
Total Raw Material Cost 19.62/kg H
2

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/5.04X10
7
kg H
2
)
=

= Php 19.5/kg H
2

2. Iron Oxide (Fe
2
O
3
)
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 H
2
)
=

= PhP 0.05485/kg H
2

178

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 H
2
)
=

= PhP 0.06875/kg H
2

Total Raw Material Cost = Php19.6/kg H
2

B. UTILITIES

1. Cooling Water
Cost of H
2
O from Maynilad as of March 2009
1m
3
= Php 16.5
Cost of H
2
O = Php 16.5/m
3
(m
3
/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 H
2
)
=

Php 0.0021625/kg H
2

Quencher:
Water Supplied = (61019.439 kgH
2
O/ hr) = 439339960.8kg/yr
Cost of Water Supplied = 439339960.8 kg/yr (Php 0.0165/kg)(1yr/50400000kg H
2
)
=

Php 0.03595/kg H
2

Scrubber:
Water Supplied = 153681.93 kg H
2
O/hr = 1106509896 kg/yr
179

Cost of Water Supplied = 1106509896 kg/hr (Php 0.0165/kg) (1yr/50400000kg H
2
)
=

Php 0.090575/kg H
2

Total cost of water = Utilities = P 0.51475/kg H
2

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 5
th
Edition p. 265)
Operating Labor Cost = P 47.75/hr (38 employee-hr/day-p.s. step) (300days/1yr) ( 5 p.s.)
(1yr/50400000kg H
2
) = Php 0.054/kg product

Php 19.80/kg product

= Php 998,056,080

TOTAL WORKING CAPITAL COST Php 998,056,080

180

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

181

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 Materials
Raw Materials Quantity
(kg/yr)
Cost
(Php/kg)
Total Cost
(Php/kg H
2
)
Heavy Fuel Oil 65,211,690 6 77.8
Iron Oxide (Fe
2
O
3
) 16,122 686 0.219
Activated Carbon 153,834.24 90 0.275
Total Raw Material Cost = 78.49/kg H
2

Basis : 1 year = 300 days
$1 = Php 48

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/5.04X10
7
kg H
2
)
= Php 77.8 = Php 78/kg H
2

182

2. Iron Oxide (Fe
2
O
3
)
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 H
2
)
= P 0.219/kg H
2

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 H
2
)
=Php 1.65/ kg

Total Raw Material Cost = Php 78.49/kg H
2

183

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, 5
th
Edition Figure 6-9 page 265.
Operating labor = 38 employee-hr/day-processing step
(Fig. 6-9 P & T 5
th
Edition p. 265)
Operating Labor Cost = P 47.75/hr (38 employee-hr/day-processing step) (300days/1yr) (
5 pcs.) ((1yr/50400000kg H
2
)
= 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:

OL= 124,830 emp-hrs/yr x 50= Php 6,241,500/yr

184

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, 5
th
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

185

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, 5
th
Edition page 267, utility cost for ordinary chemical processes amount to
10-20% of the total product cost.

1. Cooling Water

Cost of H
2
O from Maynilad as of March 2009
1m
3
= Php 16.5

Cost of H
2
O = Php 16.5/m
3
(m
3
/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 H
2
)
= Php 0.00865/kg H
2

186

Quencher:

Water Supplied = (61019.439 kgH
2
O/ hr) = 439339960.8kg/yr

Cost of Water Supplied = 439339960.8 kg/yr (Php 0.0165/kg)(1yr/50400000kg H
2
)

= Php 0.1438/kg H
2

Scrubber:

Water Supplied = 153681.93 kg H
2
O/hr = 1106509896 kg/yr

Cost of Water Supplied = 1106509896 kg/hr (Php 0.0165/kg) (1yr/50400000kg H
2
)

= Php 0.3623/kg H
2

Total cost of water = Utilities = Php 0.51475/kg H
2

187

Exhibit 2-E

Maintenance and Repairs

Annual cost for equipment maintenance and repairs may range from 2 to 20% of
equipment cost.

Timmerhaus, 5
th
Edition, Figure 6-18 page 273.

Maintenance and Repair = 6% FCI

=

188

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.

Timmerhaus, 5
th

Operating Supplies = 15% Maintenance and Repair

= (0.15)(1.88)

= Php 0.28/kg H
2
O

189

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%.

Timmerhaus, 5
th

Laboratory Charges = 15% of Operating Labor

= (0.15) (0.054)


190

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

B

/kg product

191

Exhibit 2-I

Local Taxes

Magnitude of local property taxes depends on the particular locality of the plant
and the regional laws.

Timmerhaus, 5
th

Local Taxes = 2.5%FCI

=

Php kg piouuct

192

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.

Timmerhaus, 5
th

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 H
2

193

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.

Timmerhaus, 5
th

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

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


194

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 NFu cost uen Expenses

Php
kgB

Php
kgB
TPC TPC

TPC = Php 113.25/kg H
2

1. Administrative Cost

= 20% (O.L. + DS&CL + M&R)

= 0.2(2,721,750 + 476,280 + 94,752,000) /50,400,000

= Php 0.3907/kg H
2

195

2. Sales and Marketing

= 20% TPC

= 0.2(113.25/kg H
2
)

= Php 22.65/kg H
2

3. Research and Development

= 5% TPC

= 0.05 (113.25/kg H
2
)

= Php 5.6625/kg H
2

Total General Expenses = Php 29.7571/kg H
2

196

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

197

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 H
2

198

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, 5
th
edition page 223

Total Cost = FCI + Working Capital
FCI = 2,564,910,950
Working Capital = 998,056,080
Total Cost = 3,562,967,030

Assumption: 50% increases in TPC
TPC= 113.25 x 1.5 = Php 169.88/ kg H
2

199

Annual Profit = Q (USP T PC)
Where:
Q = Capacity (Amount produced)
USP = Unit selling price
PC = Product Cost

Annual Pioit
kgB
yi

Php
kgB

Php
kgB

TCI = Php

% ROI = (/ 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
VARIABLE COSTS = Direct Production Cost
= Php 81.2463/kg H
2

UNIT SELLING PRICE = Php 288 /kg H
2

200

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 %

Cost Estimation (August23)

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