Revenue requirements, product

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. 

The objective function used is dependent on the production information provided. If the production requirements are given for the time horizon of interest, e.g. the tonnage required, required number of batches, etc., then the objective function is the minimisation of effluent. If the production is not given then the objective is the maximisation of profit, where profit is defined as the difference between revenue from product, cost of raw material and effluent treatment costs. A typical profit objective function is given in constraint (7.50). This objective function is used in the illustrative examples. 

The objective function can take two forms depending on the production information given. If the required production is known, then the objective is the minimisation of effluent. If this is not the case then the objective function takes the form of a profit function, where profit is dependent on the revenue from product, the cost of the raw material and the treatment costs of the effluent. 

Net Annual Revenue Required Annual Hydrogen Production... 

Gross Revenue Required Less By-Product Credits 56,359 88,748 20,786 109,393 232,219 153,854... 

Table II shows the estimated revenue requirements. Electricity and cogenerated products costs are based on regulated utility financing, while steam costs are based on non-regulated industrial financing. The cogeneration case costs are shown on a total product basis, since two products are involved. Figure 1 shows the selling price of electricity as a function of the selling price of steam for the cogeneration case.

WOOD COMBUSTION FACILITIES - PRODUCT REVENUE REQUIREMENTS ... 

Figure 2. Production of electricity by wood combustion—effect of plant size on revenue required from the sale of electricity by a regulated utility...

Table VI shows the estimated revenue requirements using regulated utility financing. Costs for the pyrolysis case are shown on a total product basis, since two products are involved.

Table VIII presents the estimated revenue requirements. The methanol case uses regulated utility financing, and the ammonia case, non-regulated industrial financing, based on considerations of the likely markets to be served by these products. The estimated costs of producing methanol or ammonia from wood are higher than the costs of producing methanol or ammonia from coal. This is ejqplained in part by production rates (the rates from wood-derived methanol plants are about one-tenth of those from "typical" coal-derived methanol plants ammonia production rates are similar from the two resources since the ammonia market is typically demand-constrained) and partially by feedstock differences (e.g., green wood is half moisture).

Demand volatility is only one source of deviation from forecast or target revenues. New product development can be thrown off track by unexpected difficulties in scale-up. Your customer can be acquired by another company that decides to scale back or even discontinue the line of business on which you were counting. An unexpected breakthrough at a customer may suddenly ramp up the demand for one of your products. You need to have at least considered what you might do should any of these events take place, requiring that you react in a timely way. A range of plans— you don f need to be too detailed— will answer this need and allow you to move into action. 

Artificial lift systems are mostly required later in a field s life, when reservoir pressures decline and therefore well productivities drop. If a situation is anticipated where artificial lift will be required or will be cost effective later in a field s life, it may be advantageous to install the artificial lift equipment up front and use it to accelerate production throughout the field s life, provided the increased revenues from the accelerated production offset... 

The revenue from the annual sales of product As, minus the total annual cost or expense required to produce and sell the product Af , excluding any annual provision for plant depreciation, is the annual cash income Ac( ... 

Depending on the product and sales arrangement, the revenues calculation can take from a few man-hours to many man-months of effort. For instance, determining the price for a synthetic fuel from coal can be done in a very short time, based on the cost of service. However, if the price is tied to the price of natural gas or oil, the task becomes very difficult, if not impossible. On the other hand, determining the sales growth and selling price for a new product requires a great deal of analysis, speculation, market research, and luck, but projections can be made. 

In contrast, composting processes utilize a mixture of solids and yard waste under controlled environmental conditions to produce a disinfected, humus-like product. Three common composting systems are a horizontal agitated reactor, a horizontal nonagitated reactor, and an aerated static pile system (nonproprietary). Compost can be marketed as a soil conditioner in competition with such products as peat, soil, and mulch. Although a large potential market exists, significant effort is required to penetrate this market. Yard waste revenue of 6.50/m (S5/yd ) and product revenue of 2.00/m ( 1.50/yd ) appear to be reasonable market values based on various studies reported on the Web. 

The most important aspect of this is that profits can be increased by either an increase in revenues or a decrease in expenses. Water treatment operations are by and large end-of-pipe treatment technologies, and hence from the standpoint industry applications that must treat water, the investments required increase expenditures and decrease profit. Municipal facilities view their roles differently, because their end-product is clean water which is saleable, plus they may have addon revenues when biosolids are developed and sold into local markets. There are different categories of revenues and expenses, and it is important to distinguish between them. 

To compute taxable income, a taxpayer is permitted to subtract from revenues those expenses that are ncccssai y to create current sales. Expenses related to futnre sales are required to be capitalized and recovered over time. Distinctions between these two categories—current and suture sales—are sometimes hard to make, hi some cases the Tax Code permits energy producers to claim currently, or on an accelerated basis, expenditures that are related to future production and sales. This lowers income for current tax purposes, thereby increasing the after-tax return to investments in the energy sector compared to other investments. 

Returning to our discussion of benefits, we note that they fell into two principal areas the time-value of information and the improvement in laboratory productivity. As we saw, assessing the benefits from the time-value of information requires examination of the total process through which that information will be used. For example, using data such as the anticipated improvement in laboratory turn around time, the rate at which material Is produced and its value, and the current the financial losses attributable to scrap or rework, one can estimate the savings in dollars to be accrued (each hour of faulty production avoided through faster lab turnaround time yields as a gain to the firm, the revenue that otherwise would have been lost). 

The characteristics of the coatings Industry are such that most companies market many lines of products and within each line there are many individual products, each containing different ingredients. Usually the revenue from each product or each product line can not justify using this modeling/simulation approach in problem solving, because of the extent of technical efforts required. To be cost effective in our industry, only problems which cut across product lines justify the use of this approach. The two examples discussed here are selected to illustrate the types of problems which are amenable to this approach and the advantages and weaknesses of this approach in R. D. work. 

As far as the additional money capital is concerned, that required for the function of the increased productive capital, this is supplied by the portion of realised surplus-value that is cast into circulation by the capitalists as money capital, instead of as the money form of revenue. 

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