Capital allocation

Fixed capital investment Offsite capital Allocated capital Working capital Start-up expenses... 

We now consider these types of competition in turn, concluding with some remarks on capital allocation and design. 

Capital Allocation and Design. In the analysis leading to expressions for total production cost and strategies for maximizing the profit of a firm,... 

It Is safe to say that the ultimate criterion is economics. However, the economic criterion is subject to a number of intangible constraints. These constraints may include corporate attitude toward market strategy and timing, reliability, risks associated with innovation, and capital allocation. In this regard, seperation processes are no different than any other type of process. To illustrate the influence of the intangible constraints, we might consider two extreme cases. 

Cost Calculation. The main elements determining production cost are identical for fine chemicals and commodities (see Economic evaluation), a breakdown of production cost is given in Table 2. In multipurpose plants, where different fine chemicals occupying the equipment to different extents are produced during the year, a fair allocation of costs is a more difficult task. The allocation of the product-related costs, such as raw material and utiHties, is relatively easy. It is much more difficult to allocate for capital cost, labor, and maintenance. A simplistic approach is to define a daily rent by dividing the total yearly fixed cost of the plant by the number of production days. But that approach penalizes the simple products using only part of the equipment. 

The fixed capital estimate depends on the definition of the plant. A grass-roots plant is a complete faciUty at a new location, including all utihties, services, storage faciUties, land, and improvements. If a process plant is located at an existing processing complex, it can usually share some of these auxihary faciUties. A battery-limits plant is defined as the process faciUty itself, so that the auxiUaries, off-site, and land-related items are excluded from the fixed capital estimation. However, a battery-limits plant maybe assigned allocated capital charges for the share of common utihty and service faciUties used by the plant. 

At processing complexes, central utiUties and other faciUties are shared by several battery-limits process plants. The capital cost of a central utiUty is sometimes charged to the capital cost of each battery-limits plant as an allocated capital cost based on the unit capital cost of the utiUty faciUty and the units of capacity of the utiUty required by the plant. In this case, the use charge per unit consumed only covers operating expenses. The alternative is to recover utihty capital costs, as well as operating expense, in the unit usage charge. 

Overheads in the chemical-process industries are commonly calculated as a percentage of (I) direct materials cost, (2) direct labor cost, or (3) prime or direct costs. Other methods of allocating overheads are on the basis of (I) plant area, (2) number of employees, (3) capital value, and (4) elec tric power. 

An alternative to allocating overheads by using a single method is to classify the various overheads into groups and to use the most appropriate allocation for each group. For example, depreciation would be allocated on the basis of capital cost, while indirect labor might be allocated either on the basis of direct labor cost or on the number of employees. Clearly, this alternative method is more complex, increases the associated accountancy costs, and is prone to misinterpretation and possibly abuse. 

Number of inadequately controlled risks identified and corrected, along with the appropriate allocation of capital to risk reduction activities... 

It is important to remember that unexpected benefits may arise from integration. You should actively look for these benefits and document them. It may be possible to improve some of these benefits by small modifications to the plan or integration framework. Such additional work should be undertaken only with the appropriate approvals. Never the less, if any benefits would only be achieved with the integration project, you should include them in your overall statement of benefits. An example of this might be the better allocation of capital to risk reduction efforts when an integrated risk assessment is done-addressing several different types of risk. 

Prior to writing bids, the client should decide when he wishes the work to be carried out. Factors affecting his decision will be availability of funds either from loans or grants, or in the case of local authorities or central government departments, it may be that a capital or revenue allocation needs to be spent within a particular financial... 

This whole picture suggests that chemical recycling is financially still a rather uncertain business, a view that is indeed reinforced by cost calculations. The basic point probably is that purpose-built recovery installations will always have trouble in competing with technologies built for another purpose, but which happen to be able to recycle or recover MPW - which is the case with blast furnaces and cement kilns. The latter have the advantage that capital investment does not need to be allocated to the MPW. 

One of the major costs in the electrolytic production of chlorine is electrical power. Should the power be purchased, or is a power generating station to be built If a power generator is to be built, should it be built large enough so that it can provide power for future expansions and for other existing plants the company may own in the general area The answers to these questions will greatly affect the amount of capital the company must allocate for the project. 

Distortions occur on the capital market, as the market value of companies that operate under this regulation scheme is not an indicator for the efficient allocation of capital between companies. 

Rice, N., P. Dixon, D. Lloyd and D. Roberts (2000), Derivation of a needs based capitation formula for allocating prescribing budgets to health authorities and primary care groups in England regression analysis , British Medical Journal, 320, 284-8. 

Global transportation and transit inventory planning differentiates sent and received transportation quantity allocation cases and calculates transit inventories and capital costs on the transportation lane. 

The most developed expanded reproduction schema is referred to by Marx as schema (B) of the First Example in section 3 of chapter 21, Capital, volume 2 (ibid. 586-9). This is shown in Table 2.2, the numbers representing a modification of the simple reproduction table. The same assumptions are maintained as under simple reproduction, apart from relaxation of the restriction that all surplus value be allocated to capitalist consumption. 

A first step in the analysis is to show explicitly how the elements of surplus value are allocated. Marx s numerical example of expanded reproduction (Table 2.2) can be explored in more detail by distinguishing, for each sector i, between capitalist consumption (uj, incremental changes in constant capital (cfQ and changes in variable capital (eft)). Numerical values for these terms are displayed in Table 3.1. In Department 1, for example, one half of the extracted surplus value of 1,000 is invested in the expansion of capital, with 400 directed to new constant capital and 100 to new variable capital. The remaining 500 units of surplus value are consumed by Department 1 capitalists. 

After allocating goods to support its own workers, the consumption goods sector produces a surplus (Pf) which is used to support workers in the capital goods sector. Workers in the capital goods sector spend their wages (Vf) on these surplus consumption goods and hence... 

The Bauer/Grossmann interpretation of Marx s reproduction schema can be contrasted with our alternative perspective in which the role of money provides the focus of analysis. For Kalecki (1991c 241), it is capitalist investment and consumption decisions which determine profits, and not vice versa . In the Grossmann approach, however, capitalist consumption is a residual left over once capitalists have decided their production of surplus value, out of which new constant and variable capital are allocated. The capitalist consumption portion of surplus value is not determined by the amount of money advanced at the start of the production period, but by the portion left once production has been completed. 

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