The Cost Element

Measurements and Audits. The enabling element of continuous improvement is measurement. An old rule of thumb says that increased accuracy in measuring an energy use ultimately yields a reduction in use equal to 10% of the increased closure of the balance. A basic principle of economics is that any thing that is free is used in excess, ie, an unmetered electrical use is bigger than expected by at least 10%. Metering of the cost elements at each unit in a chemical plant provides effective accountabhity. Measurements should be linked via computer software to production as weh as to weather to result in maximum feedback. 

The standard requires the supplier to have a process for identifying the cost elements or price in developing quotations. 

NOTE Ratios of resins used for CP must also consider the cost element because anion resins are considerably more expensive than cation resins. 

The price of the coal delivered to the plant, and the basis for all of the cost elements of the operating cost estimate. 

Future molecules from the biotechnology industry may be very expensive, and thus it is essential to maximise lung deposition even with the use of somewhat large devices. The cost element may also drive the device to unit dose, which is against the trend for asthma/COPD. 

The influence of different factors subject to uncertainty can be assessed by a sensitivity analysis. The most probable values are attributed to the base case. Then alternatives are generated by allowing errors in each factor, as for example variations in prices for raw materials, products or utilities, or different interest rates. The discounted cash flow analysis can determine which are the cost elements having the strongest influence on the NPV and DCFRR, and which are unimportant. This type of analysis is relatively simple to be done with a spreadsheet. The formulation of the problem in term of ratios can bring useful insights. 

An analysis of the cost elements again reveals the importance of obtaining high operating efficiencies ... 

Project evaluation review technique (PERT), was developed for use in predicting the expected duration of projects and monitoring the progress of the project s activities. It is based on using the most likely cost estimate, optimistic estimate (lowest cost) and pessimistic estimate (highest cost). These estimates are assumed to correspond to the beta distribution, which can be symmetrical or skewed left or right. Using the three estimates, a mean and a variance for the cost element can be calculated as... 

Cost Breakdown Structure (CBS) This is the most important step as it identifies all the associated cost elements as well as establishes the boundary of the LCC analysis. This is to prevent any omission and double counting of the cost elements. 

The first approach is when the factors of the cost elements are known with a known accuracy level. 

The benefit of cost-to-serve analysis is twofold identification of the cost elements of a relationship and the visualization of orders that are not profitable. The relative costs per customer can vary greatly as shown in Figure 5.6. 

The cost elements are obviously interrelated. Design changes and modifications made to improve reliabihty and maintainabiUty, will shift the revenue curve upward. This shift is achieved because production interruptions are reduced, and production at maximum capacity is possible at a greater percentage of time. Improved rehabihty and maintainahihty... 

Some of the cost elements in Table 2.14 are set at M (a very large value) to denote shipments that are not possible. For example. 

These duties are outlined in ss. 2-5 where the obligations are qualified by the phrases so far as is reasonably practicable and best practicable means. Interpretations of these phrases have been made which indicate that reasonably practicable implies a balance of the degree of risk against the inconvenience and cost of overcoming it, whereas best practicable means ignores the cost element but recognises possible limitations of current technical knowledge. 

Scope definition As with any other issues, at the starting point it is necessary that the problem, scope, and boundary limit are well-defined so that there is no ambiguity in targeting the issue. Here the aspects, boundary limits of program phases, and the equipment and activities to be covered in modeling are defined to get a clear definition of the cost elements. 

The U.S. Air Force (USAF) was quick to realize that the composite materials that added so much performance were also very costly. The USAF supported, and still supports, many development programs to identify the excessive cost contributors and to find techniques to reduce them. A recent presentation showed the present accretion of the cost elements. These costs, referred to as the composite cost chain, have been fairly consistent over the past 30 years for aircraft and aerospace applications and are broken down as follows ... 

To consider differences in design (e.g., number of cavities, material, etc.), individual correctional factors can also be used, which leads over to the next methodology to be described the cost element methodology, which is also called variable costing. 

The developed methodology is illustrated in Figure 1. The overall model consist of four blocks. The inputs of the model are introduced in the Inputs block. The inputs are processed in the Data Process block and then considered for the Simulations block. In the Simulations block, processed climate series, forecasted failure behaviours and vessel accessibihty and operabiUty values are synthesised and OPEX calculations are performed. The cost elements which influence offshore O M activities are then employed along with these results to support the decision making. Final decision choices are determined not only from a power production point of view, but also in terms of cost, revenue and profit. 

Based on this discussion. Table 5.3 gives the classification of the cost elements in the model. There are more cost elements in the ISC compared with the DSC. In order to increase the flexibility, all cost... 

The cost elements in Table 5.3 have been considered. 

The objective function in the mathematical model is based on the data from the interviews and the cost elements which appear in the literature, such as raw material cost and delay penalty cost. However, the interview data provides a comprehensive study for identifying all main cost elements. 

When we say some of , it is because the extent to which the secondary elements inherit the structure of the primary elements depends on the type of element. The cost elements will inherit the subdivision into functions, but will not... 

Cost accounting is a well-developed discipline, with numerous methods and standards. And normal life cycle costing, as it is employed in traditional systems engineering, is described in various publications [4]. The life cycle aspect is reflected in our approach, as both the Cost and the Revenue are measured per accounting period over the life of the project. But as noted at the end of Sec. C4.3, when working in the functional domain, cost is seen as a consequence of requiring the plant to have a particular functionality. Consequently, the primary requirement on a cost accounting appropriate to the functional domain is that the cost elements correspond to primary elements. The additional properties of the primary elements, such as reliability and durability, as may be expressed by secondary elements, influence these cost elements. 

In principle, if a function is described in more detail as a number of interacting sub-functions, the cost element related to the function would be described by a corresponding number of cost sub-elements related to the sub-functions. But here the difference between primary and secondary elements, as described in Sec. C5.5, becomes apparent the cost sub-elements do not interact to form the cost element, their cost values are simply summed in the cost element. Consequently, if the value of a cost element at a certain level of development of the functional description is already known, there is no benefit in developing the cost aspect of this function in any further detail. This is the reason why there is not necessarily a one-to-one relationship between primary elements and cost elements. 

Fig. C6.21 Graphical representation of the Cost element defined in Figs. C6.19/20.

To analyse the effect of the change in the cost elements that were difficult to quantify, a sensitivity analysis is performed on the optimal inspection period by altering the inspection repair cost Costm) and the inspection cost (Costk). The following five cases were considered ... 

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