Direct cost

The manufacturing cost consists of direct, indirect, distribution, and fixed costs. Direct costs are raw materials, operating labor, production supervision, utihties, suppHes, repair, and maintenance. Typical indirect costs include payroll overhead, quaHty control, storage, royalties, and plant overhead, eg, safety, protection, personnel, services, yard, waste, environmental control, and other plant categories. However, environmental control costs are frequendy set up as a separate account and calculated direcdy. The principal distribution costs are packaging and shipping. Fixed costs, which are insensitive to production level, include depreciation, property taxes, rents, insurance, and, in some cases, interest expense. 

Direct costs are those that can be directly charged to a single product. The most obvious direc t cost is for raw materials, of which the quantity consumed is directly proportional to the amount of product manufactured. Direct process labor is also considered to be a direct cost. 

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. 

Problems can also arise when allocating overheads on the basis of direct labor cost. Let us consider a company that evaluates overheads at 125 percent of direct labor cost. A process plant employs seven operators, each with a direct cost of 10,000 per budget period. As a result of a works-study exercise, it is found that the plant can operate satisfactorily with six operators. The ac tual cost saving is hkely to oe far nearer to the direct labor savings of 10,000 per period than to the calculated saving of 10,000 -t- 10,000(125/100) = 22,500 per period. The 22,500 calculated saving is the direct labor cost plus overheads taken as 125 percent of the direct labor cost. 

A thorough analysis should be made before production is stopped on a product that is losing money. Although direct costs of the discontinued product will be saved, overheads are not ehminated, as might be inferred from taking overheads as a percentage of direct material, direct labor, or prime costs. The plant is stiU there, together with its... 

Methods 1, 2, and 4 are termed direct costing, variable costing, and marginal costing respectively. Although direct costing is being increas-... 

Miscellaneous Direct Costs Estimates for the cost of maintenance and repairs, operating supplies, royalties, and patents are best based on company records for similar processes. A rough average value for the annual cost of maintenance is 6 percent of the capital cost of the plant. This percentage can vaiy from 2 to 10 percent, depending on the severity of plant operation. Approximately half of the maintenance costs are for materials and half for labor. Royalty and patents costs are in the order of 1 to 5 percent of the sales price of the product. 

A typical summaiy of an approximate range of spiral concentration plant direct costs is given in Table 19-11. 

TABLE 19-11 Approximate Range of Direct Costs for Spiral Concentration... 

All this increases the direct cost of the appliances, on the one hand, and is an tidditional burden on the already overloaded lines, on the other, by permanent losses of such voltage boosters, which further erode the p.F. of the system. 

Your process may produce wastes that cannot be treated on-site, and so must be transported off-site for treatment and disposal. Wastes of this type are usually non-aqueous liquids, sludge, or solids. Often, wastes for off-site disposal are costly to transport and to treat, and represent a third-party liability. Therefore, minimization of these wastes yields a direct cost benefit, both present and future. Measure the quantity and note the composition of any wastes associated with your process that need to be sent for off-site disposal. Record your results in a table or an appropriate spreadsheet. 

The technology that competes with ion exchange in wastewater application is reverse osmosis (RO), therefor it is appropriate to make some comparisons. Direct cost comparisons are not straightforward, and requires comparison of some of the hidden cost parameters. Since there appear to be few detailed comparisons in the open literature, there exists the general impression that RO is more economical than ion exchange. Whereas this may be true in a number of applications, as a general rule this is not the case. 

Q The integration is designed solely to reduce the direct costs of the PSM and ESH programs. You will not actually improve performance at all, will you ... 

A Without an improvement in performance, we would be throwing our money away. The direct cost savings alone would not justify this project. Only when we factor in improved safety and environmental performance does the cost of this project make any sense. We would not be going ahead unless we were confident that real savings are possible. 

The cost of maintenance may be greatly influenced by the disruption caused by the access requirements. This involves not only direct costs such as scaffolding but indirect ones such as disruption of a process plant, closure of roads, protection of plant and equipment in the vicinity, etc. 

Direct costs are costs for maintenance of materials, operating of supplies labour, control direct costs laboratory etc. 

If the minimal number of operators necessary to run the plant is for example 10 in a 4 shift system all the year through, than there is a total of 40 operators on the payroll. At an average salary of 20,000 a year, the total direct costs for labour are 800,000. 

As part of the total direct costs we also have to consider costs made for supplies and expenses maintenance, 3% of total capital supplies, 25% of direct labour. These figures, calculated back to one kg of L-phenylalanine are given in Table 8.6. 

Improve Catalyst Life and Steadiness. Regeneration or replacement of a catalyst is expensive both in direct cost and in lost production represented by the down time. Lowering the rate of deactivation of the catalyst whether by fouling, by sintering, or any other irreversible process will improve the economics of a process. 

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