Expense, manufacturing-operating total product

The development and improvement of scientific-technical level of NDT and TD means for safety issues is connected with the necessity to find additional investments that must be taken into account at the stage of new technogenic objects designing, when solving new arising problems in social, economic, ecological and medical safety. It is not accidental, that the expenses for safe nuclear power plants operation cover 50% of total sum for construction work capital investments. That is why the investments for NDT and TD have to cover 10% of total amount for development and manufacturing of any product. 

Fixed capital investment Working capital requirements Total capital investment Total manufacturing expense Packaging and in-plant expense Total product expense General overhead expense Total operating expense Marketing data Cash flow analysis Project profitability Sensitivity analysis Uncertainty analysis... 

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. 

The best source of information for use in total-product-cost estimates is data from similar or identical projects. Most companies have extensive records of their operations, so that quick, reliable estimates of manufacturing costs and general expenses can be obtained from existing records. Adjustments for increased costs as a result of inflation must be made, and differences in plant site and geographical location must be considered. 

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. 

This manufacturing expense sheet has four distinct parts the heading, raw material section, direct conversion expenses, and indirect conversion expenses. The heading identifies the product to be made, the amount produced, the fixed capital investment, and sometimes the location, yields, operating time, and other items. The raw material includes the raw materials used to produce the product as well as any by-products for which credit may be received. The direct expenses include utilities, labor, and maintenance. The sum of these two sections is the direct conversion expense. The indirect expenses include the depreciation and plant indirect expenses, such as plant security, fire protection, roads, docks, and so forth. These expenses occur continually regardless of whether a product is produced. The sum of these expenses is the total indirect conversion 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. 

At present about 77% of the industrial hydrogen produced is from petrochemicals, 18% from coal, 4% by electrolysis of aqueous solutions and at most 1% from other sources. Thus, hydrogen is produced as a byproduct of the brine electrolysis process for the manufacture of chlorine and sodium hydroxide (p. 798). The ratio of H2 Cl2 NaOH is, of course, fixed by stoichiometry and this is an economic determinant since bulk transport of the byproduct hydrogen is expensive. To illustrate the scde of the problem the total world chlorine production capacity is about 38 million tonnes per year which corresponds to 105000 toimes of hydrogen (1.3 x I0 m ). Plants designed specifically for the electrolytic manufacture of hydrogen as the main product, use steel cells and aqueous potassium hydroxide as electrolyte. The cells may be operated at atmospheric pressure (Knowles cells) or at 30 atm (Lonza cells). 

The working capital for an industrial plant consists of the total amount of money invested in (1) raw materials and supplies carried in stock, (2) finished products in stock and semifinished products in the process of being manufactured, (3) accounts receivable, (4) cash kept on hand for monthly payment of operating expenses, such as salaries, wages, and raw-material purchases, (5) accounts payable, and (6) taxes payable. 

A newly developed manufacturing process may be implemented in an existing production line if it is not fully booked and an investment is saved. However, if there is no free capacity or if the new product requires new unit operations and processes a new plant needs to be built. The simpler manufacturing process the cheaper investment, but the investment part of today s closed loops due to environmental concerns, often constitute 30% of the total investment. The capacity of a new plant must be decided. A larger capacity is more expensive, although it is not a linear relationship. The investment cost is seen as a capital cost in the cost calculus of a new product, and it is dependent on the capacity utilisation. Therefore, the decision of a planned capacity will be taken in close cooperation with the company s marketing people. 

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