Costs and pricing

Investment, Costs, and Prices for Barley and Malt. Estimated malthouse investment (1993) and costs for a new malthouse with annual capacity of 120,000 t are shown in Table 2. This malthouse is equipped with twelve 1,700-bushel steep tanks, eight 10,000-bushel germination compartments, and two double-deck kilns. The kilns are equipped with standard heat recovery units and indirect heat. 

Eig. 8. Barley cost and price of malt and barley, Minneapolis basis A, barley price B, malt price and C, barley cost (41 and Bio-Technical Resources files). 

The cost and price of sulfuric acid depend in large part on raw material cost and on freight costs. In many areas, the deUvered cost of sulfur is the most important factor affecting sulfuric acid pricing. By-product raw material, ie, SO2, costs at smelters are essentially zero, but the remote locations of many smelters make freight costs significant. Nevertheless, the nondiscretionary nature of smelter acid means that it must be sold if the smelter is to operate. 

It is worthwhile to make tables or plot cuives that show the effect of variations in costs and prices on profitabihty. This procedure is called sensitivity analysis. Its purpose is to determine to which factors the profitabihty of a project is most sensitive. Sensitivity analysis should always be carried out to obseive the effect of departures from expec ted values. 

Effects of Differential Inflation Inflation can be general or differential. In the first case, all costs and prices increase at a uniform rate. In the second, government controls and other factors cause the various costs and prices to inflate at different rates. 

While resoles account for most of the volume in phenolic products, novolacs account for most of the diversity. They are used in a wide variety of applications. They also tend to be significantly more expensive than resoles. The higher cost and pricing structure permits more creativity in their formulation. Many novolacs are made in small volumes and are formulated for very specific purposes. It is, therefore, rather difficult to make meaningful generalizations about novolacs beyond a few basic concepts. 

Tbe necessity to achieve shorter press times is omnipresent within the wood industry, based on the constant pressure on costs and prices. Increased production rate gives the chance to reduce production costs, as long as the market takes up the surplus products. 

A further benefit is that this treatment makes the uncertainties more explicit. If the payback time is five years, then it is clear that the calculated benefit hangs on estimates of markets, costs, and prices up to five years ahead the shorter the interval, the less the uncertainty. In troubled economic times, short payback strategies may be deliberately sought. 

Finally, we should mention that in addition to solving an optimization problem with the aid of a process simulator, you frequently need to find the sensitivity of the variables and functions at the optimal solution to changes in fixed parameters, such as thermodynamic, transport and kinetic coefficients, and changes in variables such as feed rates, and in costs and prices used in the objective function. Fiacco in 1976 showed how to develop the sensitivity relations based on the Kuhn-Tucker conditions (refer to Chapter 8). For optimization using equation-based simulators, the sensitivity coefficients such as (dhi/dxi) and (dxi/dxj) can be obtained directly from the equations in the process model. For optimization based on modular process simulators, refer to Section 15.3. In general, sensitivity analysis relies on linearization of functions, and the sensitivity coefficients may not be valid for large changes in parameters or variables from the optimal solution. 

A recent lOM report points out that government pricing policies - low costs and price caps - conflict with the need to stimulate investment in vaccine development and production capacity (Rappuoli, Miller, and Falkow 2002). Given the high social value of vaccines development (McGuire 2003), this policy seems to be shortsighted. 

Bloom, B. D. J. Wiertz, and M. Pauly. 1986. Cost and Price of Comparable Branded and Generic Pharmaceuticals. Journal of the American Medical Association 256( 18) 2523-2530. 

Simple breakeven analysis turns on building a simple linear model relating various costs and price. Say we get a price P per unit of product for which we pay a fixed cost F and a variable cost V. If we sell n units of the product, we may calculate the net revenue R received as follows ... 

Market (commercial) risks are related to the costs and prices of project inputs and products and the size of the market. Table 15 provides a matrix of these risks. In this instance, too, some mitigation strategies require a consistent policy to be developed and followed country-wide (e.g. maintaining proper balances between current accounts and goods and services accounts). 

Fig. 16.1 The large increases in basic chemicals costs and prices were due to a few very big factors.

All of these actions require a thorough understanding of the current and potential cost and price drivers along the entire chain. Downstream players more focused on customer needs and product performance often lack this knowledge and may need, for example, to hire upstream experts to achieve the skills needed to dissect these exposures and identify cost-effective hedging solutions. 

The demand for electricity varies by the time of day, the week and the season. The cost and price of electricity are high at times of peak power demand and low at times of low power demand. The high cost of peak power reflects the fact that the facilities needed to produce much of this power are operated for only a few hundred or a thousand hours per year. This is shown in Table 2, which lists the marginal prices of electricity in 2004 for nine US electric grids (FERC, 2004). 

Over the past seven years, a number of groups in the U.S. have announced plans for Lurgi coal gasification commercial projects to produce SNG. However, none of these projects has reached the construction stage. The main reasons for the delays have included problems with government approvals and regulations. Difficulties with environmental clearances, the cost and pricing... 

The PHA-based biodegradable polymers market is still very much at the developmental stage with few commercial applications in existence. In 2005, market tonnage is estimated at no more than around 250-300 tonnes worldwide. Assuming that producers are successful in bringing down PHA production costs and prices, and in developing niche applications, market tonnage could be around... 

The costs and prices assumed for this calculation approximate the figures prevailing in 1913-1914 in a country with its own coal supply. The example is given solely to show the beginner how the cost price of a relatively simple azo dye is arrived at from many separate items. Appreciably higher prices prevailed in Switzerland in 1913, however. 

An additional complication in formulating the objective function is the quantification of uncertainty. Economic objective functions are generally very sensitive to the prices used for feeds, raw materials, and energy, and also to estimates of project capital cost. These costs and prices are forecasts or estimates and are usually subject to substantial error. Cost estimation and price forecasting are discussed in Sections 6.3 and 6.4. There may also be uncertainty in the decision variables, either from variation in the plant inputs, variations introduced by unsteady plant operation, or imprecision in the design data and the constraint equations. Optimization under uncertainty is a specialized subject in its own right and is beyond the scope of this book. See Chapter 5 of Diwekar (2003) for a good introduction to the subject. 

To help control the price of drugs, the government of India instituted the Drug (price control) Order of 1970. The Bureau of Industrial Cost and Prices is continuing its work on the matter and has submitted further recommendations to the government. The position of the pharmaceutical industry is difficult, since it has to consider both fixed prices and growing costs. This will require strict control on spending and also steps to see that productivity increases. 

One final point is of significance. As conditions have been attained for the maximum yield of X, the reactor has become relatively large. At 5°C the reaction rate will be low and the total conversion is approaching 100%. Whether it is advisable to operate at these conditions for maximum conversion of Xdepends on the economics of reactor costs, separation costs, and price of product X. 

Basic cost and price data from Figures 1 and 5 were used in the computations. The results of six pertinent cases for the all-chemical refinery are contained in Table V. 

Varying cost and pricing considerations affect companies that participate at each level of this complex manufacture and distribution scheme. Moreover, these relationships are constantly changing. 

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