+ Cost accounting Direct costs – construction, operation Indirect costs, overhead – shared costs with other elements of the company Miscellaneous expenses Administration Distribution and selling R,D, & E – research, development, and engineering Which is usually the largest fraction?
+ Plant costs + Overview References: Product and Process Design
Principles Seider, et al Plant Design and Economics for Chemical
Engineers Peters & Timmerhaus Cost and asset accounting Cost
estimation Interest and investment costs Taxes and insurance
Depreciation Profitabiliyt, alternative investments, and
replacements + Cost accounting Direct costs construction, operation
Indirect costs, overhead shared costs with other elements of the
company Miscellaneous expenses Administration Distribution and
selling R,D, & E research, development, and engineering Which
is usually the largest fraction? + Direct costs Cost basis = unit
cost * quantity Establish: Standard cost Standard quantity Variance
= difference between actual and standard values Quantity variance
Cost variance Sensitivity analyses on possible variances at project
inception can be useful. back of the envelope design + Compute the
variance variance example Raw material, kg/yrcost, $/kg total
material cost, $/yr budget 11,200,000 $0.52 ? actual 10,500,000
$0.51 ? variance ? ? ? % variance ? ? ? + variance example Raw
material, kg/yrcost, $/kg total material cost, $/yr budget
11,200,000 $0.52 $5,824,000 actual 10,500,000 $0.51 $5,355,000
variance 700,000 $0 $469,000 % variance6.7%2.0%8.8% + goo + + + + +
+ Sensitivity analyses Almost any design element can be improved by
doing a sensitivity analysis We should do this early and often with
costs, environment/safety design elements, etc + Plant costs
economic templateChoose cme 456 Download P4 total product cost.xls
+ questions how sensitive is the total product cost to raw material
costs? How sensitive is the total product cost to unit price? How
sensitive is total product cost to plant complexity?
