Depreciable cost

A chemical plant has every type of cost associated with the operation of a car and many more. The major categories are raw materials, conversion costs, depreciation, sales, research, taxes and insurance, and general administration costs. A method for determining the magnitude of each of these follows. A summary is given in Table 10-2. 

The U. S. government has ruled that none of the costs involved in the planning, construction, and testing of a plant can be deducted from the company s income as a business expense. These are known as capitalized costs. Depreciation is the only means by which these costs can be used to reduce income taxes. All the costs that occur from the time the preliminary process design is begun until the plant begins production fall into this category. They include nearly all the items listed in Table 9-7. 

Case operating costs maintenance costs Depreciation rate Total... 

A pilot-scale demonstration remediating harbor sediment was conducted 1 year before the SITE demonstration. Based on the pilot-scale demonstration, the processing costs for a fuU-scale, 110-ton/day unit were projected to be 230/ton (September 1992 U.S. dollars). It is assumed that the unit will be down approximately 30% of the time for maintenance and design improvements in the first year of operation. Based on this system availability, 28,105 tons can be processed in one year. This cost included estimates for variable costs, fixed costs, and deprecia-tion/insurance. Variable costs include diesel fuel for a mobile generator, hydrogen, and caustic. Fixed costs include labor diesel fuel for pumps, heaters, process equipment, and instrumentation propane, water and sewer and parts and supplies. Depreciation/insurance costs include capital cost depreciated over a 3-year period, general insurance costs, and pollution liabihty insurance. This analysis does not include costs for setup and demobilization (D128007, pp. 5.12-5.14). 

TOT. PROD. COST DEPRECIATION INTEREST LOAN ADMIN. 

Taxes insurance Total cash costs Depreciation Transportation Profit... 

Notes All cash flows are discounted at 10%, IS-yr project life. Capital spending for all projects is assumed to begin in 1991. O M = operation and maintenance costs, depreciation, indirect costs, taxes, and insurance. 

Performance of NEOSEPTA-F in Sodium Chloride Solution Electrolysis. Figure 5 shows the relationship of the cell voltage and the current efficiency respectively with the concentration of sodium hydroxide in catholyte when electrolysis of sodium chloride solution was carried out at the current density of 30 A/cm. From the economical viewpoint, i.e, the electrolysis power cost, depreciation of equipment cost, membrane cost and so on, the optimum concentration of sodium hydroxide for NEOSEPTA-F C-1000 is about 20 % and that for NEOSEPTA-F C-2000 is about 27 %. 

Considering 20% of the fixed cost as the annualized cost (depreciation cost). 

Capacity of the plant Fermentation volume Productivity Biomass concentration Ethanol concentration Acetic acid concentration Substrate consumption Ethanol in pervaporate Inlet dilution rate Product dilution rate Medium bleed rate Cell bleed rate Recirculation rate Pervaporation area Microfiltration area Investment fermentor Investment distillation Investment pervaporation Investment microfiltration Total capital cost Depreciation membranes Molasses and nutrients Steam Electricity Process water Cooling water Total production costs... 

Reactors Catalyst Compressor Separation units Capital costs Depreciation (10% per year) Capital charges (5% per year) Taxes... 

Personnel costs Workshop costs Depreciation Other costs... 

Capital-dependent costs (depreciation, interest, taxes). 

After the individual cost factors have been estimated, a rough cost effectiveness calculation is possible [Solinas 1997]. This should provide information on the return on investment (= ratio of profit to capital employed) for the planned project. Investment in the process under consideration will be profitable if the sum of the revenues exceeds the total outlay and the profit (revenue-outlay) makes it possible to amortize and pay reasonable interest on the capital invested. The return on investment provided by a process can be increased by minimizing the production costs. Exposing the main cost factors (raw material, energy, waste disposal, personnel costs, depreciation) will therefore indicate the direction the development should take in order to improve the process (Table 6.2-1). 

A cost estimate for an extreme (worst case) scenario, i.e. needing to capture all the dusts from charging and tapping, was made by CTI. Table 4.45 summarises this financial data for an average foundry with the costs depreciated over a presumed 10 year lifespan of the extraction and abatement equipment. This estimation however, can broadly vary, depending on the foundry layout and the techniques used. 

For use with approximate profitability measures, as applied here to the preliminary calculation of the annual manufacturing cost, depreciation, D, is estimated as a constant percentage of the total depreciable capital, This type of depreciation is referred to as... 

Annual Sales Annual Costs Depreciation Income Tax Net Earnings Total Capital Investment ROI ... 

Year Percentage of Design Capacity Saies Capitai Costs Working Capitai Variable Costs Fixed Costs Depreciation Allowance Depletion Allowance Taxable Income Income Tax Costs Net Earnings Annual Cash Flow Cumulative Net Present Value at 15.0%... 

Usage % Capacity % used Space occupied Down time (repairs, service/maintenance) Machine cost (capital cost/depreciation or lease cost) Set up time... 

Property, plant, and equipment Property, plant, and equipment are recorded at historical cost. Depreciation and amortization are recognized on a straight-line basis over an asset s estimated useful life. Land is not depreciated and construction in progress is not depreciated until ready for service. ... 

Each type of material requires different levels and types of support. For example, commodities require the least technical support, while technical and high-performance materials require the most. On the contrary, commodities require more investment in logistics than do high-performance materials. The impact on the business is subtle—increased R D support is a direct expense, and normally runs between 2% and 5% of sales, whereas increased logistics support is likely to be in the form of additional investment in storage and transport, showing up in financial statements as depreciation and maintenance costs. Depreciation must be written off over a period of years, which tends to conceal its real cost (and increases taxable income). While some companies do capitalize and depreciate R D expenses, this is usually avoided unless the work results in a patent. 

---