Fixed cost

The second category in the cost table, the fixed costs, can be divided as follows  

Fixed-cost elements (total sum 000/year is fixed irrespective of plant output) 

The typical factors to consider when pondering B2C will include size and scale of operation, use of existing equipment, flexibility for multiproduct operation, start-up and shutdown, cleaning frequency, inventory, validation, traceability of product with respect to raw materials, equipment design, and availability as well as operational experience [50]. 

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Heat exchanger cost data usually can be manipulated such that the fixed costs, represented by the coefficient a in Eq. (7.20), do not vary with exchanger specification. If this is done, then Eq. (7.6), as derived in App. F, can be modified to ... 

To evaluate design options and carry out preliminary process optimization, simple economic criteria are required. What happens to the revenue from product sales after the process has been commissioned The sales revenue first pays for fixed costs which are independent of the rate of production. Variable costs, which do depend on the rate of production, also must be met. After this, taxes are deducted to leave the net profit. 

There can be an element of maintenance costs that is fixed and an element which is variable. Fixed maintenance costs cover routine maintenance such as regular maintenance on safety valves which must be carried out irrespective of the rate of production. There also can be an element of maintenance costs which is variable. This arises from the fact that certain items of equipment can need more maintenance as the production rate increases. Also, royalties which cover the cost of purchasing another company s process technology may have different bases. Royalties may be a variable cost, since they can sometimes be paid in proportion to the rate of production. Alternatively, the royalty might be a single-sum payment at the beginning of the project. In this case, the single-sum payment will become part of the project s capital investment. As such, it will be included in the annual capital repayment, and this becomes part of the fixed cost. 

EP = value of products - fixed costs - variable costs - taxes... 

Cost Calculation. The main elements determining production cost are identical for fine chemicals and commodities (see Economic evaluation), a breakdown of production cost is given in Table 2. In multipurpose plants, where different fine chemicals occupying the equipment to different extents are produced during the year, a fair allocation of costs is a more difficult task. The allocation of the product-related costs, such as raw material and utiHties, is relatively easy. It is much more difficult to allocate for capital cost, labor, and maintenance. A simplistic approach is to define a daily rent by dividing the total yearly fixed cost of the plant by the number of production days. But that approach penalizes the simple products using only part of the equipment. 

Among the key variables in strategic alkylphenol planning are feedstock quaHty and availabiHty, equipment capabiHty, environmental needs, and product quahty. In the past decade, environmental needs have grown enormously in their effect on economic decisions. The manufacturing cost of alkylphenols includes raw-material cost, nonraw-material variable cost, fixed cost, and depreciation. 

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 most common approach to fixed cost estimation iavolves the use of a capital recovery factor to give the annual depreciation and return on capital. This factor typically is between 15 and 20% of the total capital investment. Property taxes are taken as 1—5% of the fixed capital and iasurance is assumed to be 1—2% of the fixed capital. If annual depreciation is estimated separately, it is assumed to be about 10% of the fixed capital investment. The annual iaterest expense is sometimes neglected as an expense ia preliminary studies. Some economists even beHeve that iaterest should be treated as a return on capital and not as part of the manufactufing expense. 

Equation (9-214) gives the overpricing Acs per unit of produc tion for an increase in annual production rate AR. Equation (9-214) also gives the underpricing Acs per unit of production for a decrease in annual production rate AR. In the first case the fixed costs or overheads are said to be overabsorbed and in the second case underabsorbed. 

Absorption pricing is rigid and arbitrary and may result in business being turned away if the fixed sales price Cs cannot be obtained even though the business may give a usefiil contribution to fixed costs. 

It is common practice in cost accountancy to treat the standard semivariable cost C vow. t the normal produc tion rate as part of the standard fixed cost. In this case, Eqs. (9-225) and (9-226) can be written respectively as... 

Optimum Reflux Ratio The general effecl of the operating reflux ratio on fixed costs, operating costs, and the sum of these is shown in Fig. 13-39. In ordinary situations, the minimum on the total-cost cui ve wih geueraUy occur at an operating reflux ratio of from 1.1 to 1.5 times the minimum R = Lv + i/D value, with the lower value corresponding to a value of the relative volatility close to 1. 

Appendix III provides an overview of process economics. Two principal categories of expenditure are particularly important fixed and operating costs. The fixed cost ( ) can be distributed over the service life of the equipment as an annualized fixed cost ( /yr). The total annualized cost (TAC) of the system is given by... 

TAC = annual operating cost -I- annualized fixed cost. 

The oil-regeneration system is to be salvaged from a closing unit in the plant. Hence, its fixed cost will not be accounted for in the optimization calculations. 

Fl urf 2.13 Using mass transfer driving force to trade off fixed cost versus operating cost. 

The fixed cost,, of the stripper (including installation and auxiliaries, but excluding packing) is given by... 

Minimum number of mass exchanger units. Combinatorics determines the minimum number of mass exchanger units required in the network. This objective attempts to minimize indirectly the fixed cost of the network, since the cost of each mass exchanger is usually a concave function of the unit size. FuithetTnore, in a practical context it is desirable to minimize the number of separators so as to reduce pipework, foundations, maintenance, and instrumentation. Normally, the minimum number of units is related to the total number of streams by the following expression (El-Halwagi and Manousiouthakis, 1989). 

The data for S3 are given in Table 3.3. The absorber sizing equations and fixed cost were given in Example 2.2. Using the graphical pinch approach, synthesize a cost-effective MEN that can be used to remove benzene from the gaseous waste (Fig. 3.9). 

Since activated carbon lies to the left of the extractant and has a lower c, it will be used to remove the remaining load (0.0003 kg toluene/s, as shown by Fig. 3.19b). The flowrate of activated carbon is 0.015 kg/s. For 8000 operating hours per year, the annual operating cost of the system is 96,700/year. The annualized fixed cost can be calculated after equipment sizing (as shown in Example 2.1). 

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