Marginal cost

Our price forecast for sulfur over the next decade is predicated primarily upon two basic assumptions (1) that the Frasch sulfur producers, although now a less dominant supply source in the North American and world markets, will continue to exert price leadership, especially during periods when a tight supply demand situation exists, such as today, and (2) that the pricing of sulfur in the U.S. will be determined, in large part, by the production economics of the U.S. Frasch industry - that is, the highest cost marginal supplier. 

Plan ID Plan Name Rx s Rf s Total Plan Pay ( ) Copay ( ) Cost ( ) Margin, (%)... 

Model Revenue Material Labor Overhead Cost Margin... 

Power plants currently use fossil fuels as their main feedstock, but are interested in supplementing their feedstock with biomass. A quick calculation, however, shows that under the current market conditions the application of biomass in a power plant is not economically viable. The economic variable cost margin of the conversion of biomass into electricity would be 10% at most. This is too small a margin to justify the use of biomass in electricity production at this moment. Biomass can, however, be used more economically for the production of synthesis gas by gasification, which can be turned into methanol. Roughly, 1 ton of biomass can be converted into 1.2 tonnes of methanol, rendering the variable cost margin at a more attractive 60%. 

Dobbelaere, S., 2003. Estimation of price-cost margins and union bargaining power for Belgian manufacturing. International Journal of Industrial Organization 22, 1381-1398. 

These marginal costing approaches to costing steam are unsatisfactory. Within operating companies, few subjects generate more controversy than the value placed on different steam levels. 

In preliminary process design it mig] it be necessary to use marginal costs for steam, but the designer should keep in mind the dangers of using such costs. 

Synthesis. Because of the limited availabiUty of by-product isoprene much effort has been devoted to synthesis of isoprene. Most routes tend to have marginal selectivity and require large amounts of energy. The choice of which route is preferable depends on availabiUty and cost of raw materials and cost of energy. Several synthetic routes have been practiced commercially (103—108). 

The largest cost to produce malt is the cost of barley. U.S. barley and malt prices from 1966 through 1992 are shown in Eigure 8, along with the spread between malt and barley prices. The spread or margin between malt and barley prices is expressed in /t of malt and assumes 5% of barley purchased is cleanout barley and that 92% of barley soHds ends up as malt. Barley and malt prices are pubHshed in The Brenners Bulletin (Thiensville, Wisconsin). 

Prices. The price of commodity chemicals is based on cost of production, capital needs for expansion, and the ratio of supply to demand. Profit margins can drop under changing conditions, and unit price tends to be low. Specialty chemical prices vary widely. They are based on the value of a product or system to the customer. Profit margins can usuaHy be maintained, and unit price is higher than for commodity chemicals. 

In the past, commodity chemicals were generally priced on the basis of ROl. Capital cost was the most critical item, and those elements that ate related to capital cost were the principal factors in the selling price (excluding taw material cost in some cases). On this basis, a satisfactory ROl resulted in acceptable values for other criteria such as ROS or sales margin. Many analysts favor ROS as a benchmark for comparison because it is up to date and simple and because it is increasingly difficult to determine a tme ROl based on what profits might be on plants built under indation and expensive capital and constmction costs. 

Whereas the manufacturing cost is strongly influenced by energy prices, cost of money, and capital investment, ammonia selling prices are usually deterrnined by supply and demand. Therefore, the profitabiUty of ammonia plants is deterrnined by the margin between cost of production and ammonia price. 

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