ENCH 4290 – Intro to Chem. Eng.

Design

University of Tennessee - Chattanooga

1 .
What You Should Learn
 Factors Affecting Manufacturing Costs
 Estimation of Cost of Manufacturing
 Fixed capital investment
 Cost of operating labor
 Cost of utilities
 Cost of waste treatment
 Cost of raw materials
Estimating Manufacturing Cost
 Direct Costs
 Vary with production rate; not necessarily proportional
 Fixed Costs
 Do not vary with production, but relate “directly” to
production function
 General Expenses
 Functions to which operations must contribute
 Overhead burden
Manufacturing Cost (cont.)
 Table 8.1, pg. 204-205
 Description of items affecting manufacturing cost
 Table 8.2, pg. 206
 Factors for estimating costs
Direct Costs
 Raw materials
 100% variable with output
 Waste treatment
 Usually 100% variable with output
 Consider licensing/permitting fees
 Utilities
 100% variable with output
 Fuel gas, electric power, steam, cooling water, etc.
 We can get these from PFD
Direct Costs (cont.)
 Operating labor
 Usually fixed for short term
 Comes in blocks of cost (e.g. add a shift)
 Wages only ~60-70% of cost (vacation, sick time, SS)
 Direct supervisory and clerical labor
 Maintenance and repairs
 Usually estimated as % of fixed capital investment
 New focus on reliability engineering
Direct Costs (cont.)
 Operating supplies
 Misc. supplies for daily operation; not raw materials
 Chart paper, lubricants, filters, PPE for operators, etc.
 Laboratory charges
 For product quality control and troubleshooting
 Patents and royalties
Fixed Costs
 Depreciation
 Will cover in-depth in Chapter 9
 This is an accounting cost (for tax purposes)
 No cash flow implications; capital already spent
 Represents way to spread cost of plant over time period
 Usually 10 years
 Straight line vs. other methods
Fixed Costs (cont.)
 Taxes and insurance
 Property taxes and liability insurance
 Based on plant location and severity of process
 Plant overhead costs
 This is where company accounts for engineer’s salaries
 Payroll and accounting, fire protection and safety,
medical services, recreation and facilities, etc.
 Catch-all for auxiliary manufacturing costs
General Expenses
 Administration costs
 Salaries, buildings, other related activities
 Distribution and selling costs
 Sales and marketing
 Salaries and other misc. costs
 Research and development
 Research activities related to process/product
 Salaries, funds for equipment and supplies, etc.
Cost of Manufacturing
 Cost of Manufacture (COM) = Direct Manufacturing
Costs (DMC) + Fixed Manufacturing Costs (FMC) +
General Expenses (GE)
 COM requires estimation of the following:
 Fixed capital investment (FCI): CTM or CGR
 Cost of operating labor (COL)
 Cost of utilities (CUT)
 Cost of waste treatment (CWT)
 Cost of raw materials (CRM)
Cost of Manufacturing (cont.)
 COM = 0.280FCI + 2.73COL + 1.23(CUT + CWT + CRM)
 Includes depreciation as 10% of FCI
 COMd = 0.180FCI + 2.73COL + 1.23(CUT + CWT + CRM)
 COM without depreciation
 We use this since we will calculate depreciation more
accurately in Chapter 9
Cost of Manufacturing (cont.)
 Some examples from Table 8.2
 Maintenance and repairs: (0.02-0.1)FCI
 Proportional to size of plant
 Supervisory and clerical labor: (0.1-0.25)COL
 Proportional to operating labor
 Depreciation: some % of FCI
Cost of Operating Labor
2 0.5
 𝑁𝑁𝑂𝑂𝑂𝑂 = 6.29 + 31.7𝑃𝑃 + 0.23𝑁𝑁𝑛𝑛𝑛𝑛
 NOL = number of operators per shift
 P = particulate processing steps
 Nnp = non-particulate processing steps
 Compression, heating/cooling, separation and reaction
 In general, for processes in this class, P = 0
 Therefore, 𝑁𝑁𝑛𝑛𝑛𝑛 = ∑ 𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸
 Compressors, towers, reactors, heaters, exchangers
Cost of Operating Labor (cont.)
 Note that this equation based on data for plants with
at most 2 solids processing steps
 If P > 2, ignore middle term and add 1 operator per
solids step
 NOL is operators per shift; how many total?
 Rule of thumb is 4.5 operators hired per operator needed
 Based on operator working 49 weeks/year and five 8-hour
shifts/week, and plant operating 24 hours/day
Cost of Operating Labor (cont.)
 How much are operators paid?
 Text quotes $28.64/hour in May 2010
 From Bureau of Labor & Statistics for misc. plant and
system operators in Gulf Coast region
 Corresponds to $59,580 for 2080-hour year
 Check Bureau of Labor & Statistics for updated #’s
 http://www.bls.gov/data/
 See also The Oil and Gas Journal or Engineering News
Record for inflation indices
Example: Cumene Demo
Equipment Type Number of Equipment Nnp
Exchangers 5 5
Heaters/Furnaces 1 1
Pumps 2 -
Reactors 1 1
Towers 2 2
Vessels 2 -
Utilities and Waste Treatment
 Flowrates – Get these from PFD
 Remember that flows on PFD are per operating hour
 Must use stream factor
 Costs – see Table 8.3, pg. 212
 See also Example 8.9, pg. 227-228
Utilities – Fuel and Electricity
 Fuel for Fired Heaters
 PFD gives process load (energy balance) and fuel usage
 Thermal efficiency varies from 70-90%
 Table 11.11, item 13 (pg. 348)
 CHEMCAD default is 75%
 Fuel costs may vary wildly – Figure 8.1, pg. 210
 Electricity for pumps/compressors – Fig. 8.7, pg. 226
 Shaft power = fluid power/efficiency
 Power to drive = shaft power/drive efficiency
Cost of Fuels
Utilities – Steam
 Typical pressure levels
 Low (lps, 3-6 bar)
 We will use 5 barg, saturated ≈ 160°C
 Medium (mps, 10-16 bar)
 We will use 10 barg, saturated ≈ 184°C
 High (hps, 35-45 bar)
 We will use 41 barg, saturated ≈ 254°C
 Available saturated, but sometimes superheated
 Utilities Costs: Table 8.3, pg. 212
Steam Cost – Used in Process

Condensate
returning to steam
Just use steam cost generation system
Steam Cost – Lost in Process
Steam Cost – Made in Process

Take credit for steam,

unless steam lost in process
Utilities – Cooling Water
 Make-up based on ΔT(40-30)!
 Charge cw based on energy used (Table 8.3)
 $0.354/GJ, $14.8/1000 m3 – check how well they agree?
 Does not matter (much) if cw returned at 40°C
or 45°C – same energy
 45°C is absolute max – due to fouling
Cooling Water (cont.)
Utilities – Refrigerated Water
 Same as previous slide in that energy costs are not ΔT
dependent – but cost based on 5°C supply temperature
 Figure 8.4 (pg. 216) shows cost of refrigeration as a
function of temperature
 5°C supply, 10°C ΔT: $4.43/GJ, $0.185/1000 kg
 -20°C supply: $7.89/GJ
 Based on process cooling duty only
 -50°C supply: $13.11/GJ
Raw Materials
 Chemical prices may be found at
http://www.icis.com/chemicals/channel-info-
chemicals-a-z/
 Flowrates – Get these from PFD
 Remember that flows on PFD are per operating hour
 Must use stream factor
Example: Cumene Demo
 Let’s get COMd using CHEMCAD simulation
What You Should Have Learned
 Factors Affecting Manufacturing Costs
 Direct Costs
 Raw materials, utilities, operating labor, etc.
 Fixed Costs
 Depreciation, taxes and insurance, plant overhead costs
 General Expenses
 Administration, sales and marketing, R&D
What You Should Have Learned
 Estimation of Cost of Manufacturing (COM)
 Fixed capital investment (FCI): CTM or CGR
 Cost of operating labor (COL)
 Cost of utilities (CUT)
 Cost of waste treatment (CWT)
 Cost of raw materials (CRM)
 From these get COMd