The Structure of Production Costs

Production Cost or manufacturing cost is the sum of all of the costs required to make a product. It can usually be broken down into variable costs and fixed costs. 

Variable costs increase with production rate. Thesecosts-are computed on a per-unit (usualty tonne)-of-product basis. Common variable costs include those of raw materials, chemicals, and catalysts utilities and contract labor. 

Ammonium nitrate, prilled Ammonium sulfate, crystallization Calcium ammonium nitrate, prilled Diammonium phosphate. slurry granulation Monoamtnonium phosphate, slurry granulation Nitric add (60% HNO3) high  

Triple superphosphate, nin-of-pile Triple superphosphate, granular Urea, prilled  

Utilities include electricity, steam, process fuel, process water, boiler feedwater, cooDng water, deionized water, compressed air, instrument air, refrigeration, inert gas, and effluent treatment. The unit use is dependent on die process technology, and the cost is site dependent. For each utility, unit use and unit cost should be recorded. The estimated use of utilities for different fertiDzer processes is shown in Table 21.6. Some offsite utilities such as electricity are often priced with a fixed cost component and a variable cost component. The fixed and variable portions need to be calculated separately to provide an average variable cost per unit of production for a given annual production. 

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