Expense, manufacturing-operating direct

Environmental Control Expense Wastes from manufacturing operations must be disposed of in an environmentally acceptable manner. This direct expense is borne by each manufacturing department. Some companies have their own disposal facilities, or they may contract with a firm that handles the disposal operation. However the wastes are handled, there is an expense. Published data are found in the open literature, some of which have been published by Couper (2003k... 

To operate the chemical plant, some direct expenses must be sustained. Manufacturing costs are the expenses connected with the manufacturing operation of the process plant. These costs can be divided into direct production costs, fixed charges, plant overhead costs and general expenses. Direct manufacturing costs are expenses strongly associated with the manufacturing operations. 

The cost of manufacturing a product includes the manufacturing cost, overhead, and general expenses. Manufacturing cost includes direct expenses and consists of the cost of raw material, containers, operator and labor costs, and utilities (like electricity, steam, water, fuel, etc.). This cost will depend on the production quantity. In contrast, overhead cost will be constant irrespective of the quantity of material that is being manufactured. Overhead cost may include expenses such as employee salaries, medical services, administration, insurance, depreciation, taxes, etc. General expenses consist of freight and delivery, sales, and R D expenses. 

All expenses directly connected with the manufacturing operation or the physical equipment of a process plant itself are included in the manufacturing costs. These expenses, as considered here, are divided into three classifications as follows (1) direct production costs, (2) fixed charges, and (3) plant-overhead... 

Direct production costs include expenses directly associated with the manufacturing operation. This type of cost involves expenditures for raw materials (including transportation, unloading, etc.,) direct operating labor supervisory and clerical labor directly connected with the manufacturing operation plant maintenance and repairs operating supplies power utilities royalties and catalysts. 

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. 

The cost of equipment determines the capital investment for a process operation. However, there is no direct relationship to profits. That is, more expensive equipment may mean better quality, more durability and, hence, longer service and maintenance factors. These characteristics can produce higher operating efficiencies, fewer consumption coefficients and operational expenses and, thus, fewer net production costs. The net cost of production characterizes the perfection rate of the total technological process and reflects the influences of design indices. Therefore, it is possible to compare different pieces of equipment when they are used in the manufacture of these same products. 

Equation (9-9) may also be used to calculate data for a plot of manufacturing expense as a function of annual production rate, as shown in Fig. 9-7. Plots of these data show that the manufacturing expense per unit of production decreases with increasing plant size. The first term in Eq. (9-9) reflects the increase in the capital investment by using the 0.7 power for variations in production rates. Labor varies as the 0.25 power for continuous operations based upon experience. Utilities and raw materials are essentially in direct proportion to the amount of product manufactured, so the exponent of these terms is unity. 

An acceptable plant design must present a process that is capable of operating under conditions which will yield a profit. Since net profit equals total income minus all expenses, it is essential that the chemical engineer be aware of the many different types of costs involved in manufacturing processes. Capital must be allocated for direct plant expenses, such as those for raw materials, labor, and equipment. Besides direct expenses, many other indirect expenses are incurred, and these must be included if a complete analysis of the total cost is to be obtained. Some examples of these indirect expenses are administrative salaries, product-distribution costs, and costs for interplant communications. 

Certain expenses are always present in an industrial plant whether or not the manufacturing process is in operation. Costs that are invariant with the amount of production are designated as fixed costs or fixed charges. These include costs for depreciation, local property taxes, insurance, and rent. Expenses of this type are a direct function of the capital investment. As a rough approximation, these charges amount to about 10 to 20 percent of the total product cost. 

---