Plant Indirect Expenses

These indirect expenses consist of two major items depreciation and plant indirect expenses. 

The cost of goods sold represents the cash operating expenses for raw materials, labor, utilities, supplies, maintenance, waste disposal, plant indirect expenses, and so forth. 

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. 

Plant indirect expenses—3% of the fixed capital investment per year General overhead expense—6% of the annual net sales... 

Hant Indirect Expenses These expenses cover a wide range of items such as property taxes, personal and property liability insurance premiums, fire protection, plant safety and security, maintenance of plant roads, yards and docks, plant personnel staff, and cafeteria expenses (if one is available). A quick estimate of these ejq)enses based upon company records is on the order of 2 to 4 percent of the fixed capitm investment. Hackney presented a method for estimating these ej nses based upon a capital investment factor, and a labor factor, but the result is high. 

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. 

Relationship between indirect expenses and equipment capacity of plants, and distribution centers. 

The relationship between indirect expenses and capacity of the equipment installed in plants and distribution centers ... 

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. 

Companies usually include in the charge for overhead the following items operating supphes, supervision, indirect payroll expenses, plant protection, plant office, general plant overhead, and control laboratory. This overhead charge is frequently taken as an equivalent percentage of the direc t labor cost. 

Due to the high cost of replacing the feed casing and the lack of direct evidence that the ledge and large flight clearance were the root cause of the reduced rate, an alternative experiment needed to be developed that simulated the process. Without these data plant personnel were unwilling to replace expensive components and incur downtime based on indirect evidence. 

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