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CHAPTER 7

COST ESTIMATION
I. INTRODUCTION

The economic feasibility of a design depends on how a product will sell and to its

profitability. It is important to understand that a sufficient capital is needed to finance the entire

construction of the facility, including the process plant equipment completely installed, the

administrative offices and building, the workers, and also the appropriate working capital for daily

operations. Cost estimation presents a detailed estimation in establishing an economically feasible

Potassium Carbonate Manufacturing Plant which uses banana peel as its major raw material. The

investment cost and operational cost has been discussed in detail in this chapter.

A. TOTAL CAPITAL INVESTMENT

The total capital investment is comprised of the fixed capital investment in the plant and

the equipment, including the needs for the auxiliaries and non-manufacturing facilities and the

working capital investment.

For a potassium carbonate manufacturing plant of 1000 MT/yr capacity, operating 300

days/yr, the estimated total capital investment reached Php830,107,19. Total capital investment

comprises of 98.88% fixed capital investment and 1.12% working capital. The fixed capital

investment is determined from the summation of direct production cost and indirect production

cost. The direct capital investment includes 23.10% purchased equipment delivered, 9.01%

installation, 6.01% instrumentation and control, 7.16% piping system, 2.31% electrical system,

6.7% building, 2.77% yard improvement, and 12.71% service facilities, and of the total indirect

cost which includes 7.39% engineering and supervision, 7.85% construction expenses, 0.92% legal
expenses, 4.39% contractors fee, 8.55% contingency. The fixed capital investment (FCI) which

represents the amount equivalent to the complete costs and installation costs of the process

equipment is computed based on the five major equipment designed in Chapter 6 namely, rotary

vacuum filter, rotary dryer, fluidized bed reactor, jacketed stirred tank reactor, and vacuum

crystallizer. It is assumed that the costs of these five equipment represent 29.41% of the total

equipment cost of the entire plant. Also, the working capital needed to finance plant operations is

computed and added to the fixed capital investment to get the total capital investment. It is

established that 98.88% of the calculated TCI is the FCI and the remaining 1.12% is the percentage

allocated for the working capital (WC). The FCI and WC amount to Php821 million and Php9

million, respectively. The selling prices of the designed equipment are obtained from trusted

Chemical Engineering resources and textbooks. Present costs are computed based on Marshall and

Swift Indexes to take into consideration the economic impact to the price up to the present. Based

on the equipment specifications obtained from the equipment designs, the cost of purchased

equipment delivered for the major equipment is Php45 million. From there, the cost of the

remaining 70.41% of the equipment was computed as Php108 million.

Thus, in this design,

Fixed Capital Investment = Php 820,798,459

Working Capital = Php 9,308,730

Total Capital Investment = Php 830,107,190


B. TOTAL PRODUCTION COST

It is important to determine the total production cost per kilogram of the product to know

if the given design will yield a considerate amount of profit. The total production cost is determined

from the manufacturing cost which includes the variable production, fixed charges, plant overhead

cost, and the general expenses. Considering one kilogram of the potassium carbonate, the

calculated total production cost is Php164.59. This is obtained by adding the manufacturing cost

and the general expenses.

In the manufacturing cost, the total variable cost amounts to Php80.27. This is obtained by

adding the cost of the new materials which is Php7.77, operating labor of Php9.47, direct

supervisory and clerical labor of Php1.42, utilities of Php36.59, maintenance and repair of

Php20.52, operating supplies of Php3.08 and laboratory charges of Php1.42. The fixed charges is

Php32.85 which is obtained by adding the depreciation worth Php19.31, local taxes of Php10.67,

and insurance of Php2.87. The plant overhead cost is also included and it amounts to Php18.85.

The general expenses amount to Php32.61. This amount is the sum of the administrative

cost of Php6.28, distribution and marketing cost of Php18.1, and research and development of

Php8.23.

Manufacturing Cost = Php 131.97

General Expenses = Php 32.61

Total Production Cost = Php 164.59

The present selling price of a food grade potassium carbonate in the market according to

Zibo Qingxin Co. Ltd is Php350-500 per kilogram. Since the TPC is lower than the selling price,

it is safe to say that the proposed plant will be profitable.


II. ESTIMATION OF CAPITAL INVESTMENT

Plant Capacity: 1000 MT/yr, 98.5 wt% potassium carbonate (K2CO3)

Plant Operation: 300 days/yr

Dollar Exchange: 1 USD=Php49.55

% Cost (Php) Exhibit


A. Direct Cost
Purchased Equipment Delivered 23.10 3,486,076,491.08 A
Installation 9.01 1,359,569,832 B
Instrumentation and Control 6.01 906,379,887.7 C
Piping System 7.16 1,080,683,712 D
Electrical System 2.31 348,607,649.1 E
Building 6.70 1,010,962,182 F
Yard Improvement 2.77 418,329,178.9 G
Service Facilities 12.71 1,917,342,070 H
TOTAL DIRECT COST 69.77 10,527,951,003

B. Indirect Cost
Engineering and Supervision 7.39% 1,115,544,477 I
Construction Expenses 7.85% 1,185,266,007 J
Legal Expenses 0.92% 139,443,060 K
Contructor's Fee 4.39% 662,354,533 L
Contingency 8.55% 1,289,848,302 M
TOTAL INDIRECT COST 29.11% 4,392,456,379

FIXED CAPITAL INVESTMENT 98.88% 14,920,407,382


WORKING CAPITAL 1.12% 2,633,013,067 N
TOTAL CAPITAL INVESTMENT 100.00% 17,553,420,449
III. ESTIMATION OF PRODUCTION COST

Plant Capacity: 1000 MT/yr, 98.5 wt% potassium carbonate (K2CO3)

Plant Operation: 300 days/yr

Dollar Exchange: 1 USD=Php49.55

% Production Cost (Php/kg) Exhibit


I. Manufacturing Cost
A. Direct Production Cost AA
Raw Material 4.72 7.77
Operating Labor 5.75 9.47
Direct Supervisory and Clerical Labor 0.86 1.42
Utilities 22.23 36.59
Maintenance and Repair 12.47 20.52
Operating Supplies 1.87 3.08
Laboratory Charges 0.86 1.42
TOTAL VARIABLE COSTS 48.77 80.27

B. Fixed Charges BB
Depreciation 11.73 19.31
Local Taxes 6.48 10.67
Insurance 1.74 2.87
TOTAL FIXED CHARGES 19.96 32.85

C. Plant Overhead Cost 11.45 18.85 CC


TOTAL MANUFACTURING COST 80.18 131.97

II. General Expenses DD


A. Administrative Cost 3.82 6.282
B. Distribution and Marketing 11.00 18.10
C. Research and Development 5.00 8.23
TOTAL GENERAL EXPENSES 19.81 32.61

TOTAL PRODUCTION COST 100.00 164.59


EXHIBIT A

TOTAL COST OF PURCHASED EQUIPMENT

Schedule

Rotary Vacuum Filter Php 5,653,564 A-1

Rotary Dryer Php 8,480,347 A-2

Jacketed Stirred Tank Reactor Php 21,200,866 A-3

Fluidized Bed Reactor Php 2,477,500 A-4

Vacuum Crystallizer Php 7,308,625 A-5

Other Equipment Php 108,299,371 A-6

TOTAL COST Php 153,420,273

Total Cost of Purchased Equipment (Delivered)

Using 25% delivery cost,

Total Cost Delivered = Php153,420,273(1.25) = Php191,775,341


SCHEDULE A-1

EQUIPMENT: FILTER PRESS

EQUIPMENT CODE: C-1

TYPE: ROTARY VACUUM

MATERIAL OF CONSTRUCTION: SS-316

From Equipment Design,

Filter Area = 5 m2

No. of units = 1

For an area of 5 m2, continuous vacuum drum, stainless steel (PD & E, Peter & Timmerhaus 5th

Ed., Fig. 15-39, p. 864)

Purchase cost of filter press (2002) = $80,000

Using Marshall and Swift Cost Index,

1574.84
() = $80,000 ( )
1104.2

() = $114,098.17

Php49.55
= $114,098.17 ( )
1 USD

= Php5,653,564.35
SCHEDULE A-2

EQUIPMENT: DRYER

EQUIPMENT CODE: D-5

TYPE: ROTARY

MATERIAL OF CONSTRUCTION: SS-304

From Equipment Design,

Heat Transfer Area = 69.36 m2

No. of units = 1

For a heat transfer area of 69.36 m2 (PD & E, Peter & Timmerhaus 5th Ed., Fig. 15-33, p. 847)

Purchase cost of dryer (2002) = $120,000

Using Marshall and Swift Cost Index,

1574.84
() = $120,000 ( )
1,104.2

() = $171,147.26

Php49.55
= $171,147.26 ( )
1 USD

= Php8,480,346.53
SCHEDULE A-3

EQUIPMENT: REACTOR

EQUIPMENT CODE: J-1

TYPE: JACKETED STIRRED TANK

MATERIAL OF CONSTRUCTION: SS-316

From Equipment Design,

Design capacity = 15.95 m3

No. of units = 12

For a capacity of 15.95 m3 at 345 kPa (PD & E, Peter & Timmerhaus 5th Ed., Fig. 13-15, p. 628)

Purchase cost of stirred tank reactor (2002) = $25,000

Using Marshall and Swift Cost Index,

1574.84
() = $25,000 ( ) (12 units)
1,104.2

() = $427,868

Php49.55
= $427,868 ( )
1 USD

= Php21,200,866.34
SCHEDULE A-4

EQUIPMENT: REACTOR

EQUIPMENT CODE: J-2

TYPE: FLUIDIZED BED

MATERIAL OF CONSTRUCTION: ASME SA-302 GRADE B

From Equipment Design,

Design capacity = 252.75 m3

No. of units = 1

For a capacity of 252.75 m3 (https://www.alibaba.com/product-detail/Hydrothermal-Reactor-

Fluidized-Bed-Reactor-Flow_60256679932.html?s=p)

Purchase cost of fluidized bed reactor (2016) = $50,000

Php49.55
= $50,000 ( )
1 USD

= Php2,477,500
SCHEDULE A-5

EQUIPMENT: CRYSTALLIZER

EQUIPMENT CODE: D-4

TYPE: VACUUM

MATERIAL OF CONSTRUCTION: SS-316

From Equipment Design,

Design capacity = 1.94 m3

No. of units = 1

For a capacity of 1.94 m3=513 US gal, vacuum, stainless steel

(www.matche.com/equipcost/crytallizer.html)

Purchase cost of filter press (2016) = $147,500

Php49.55
= $147,500 ( )
1 USD

= Php7,308,625
SCHEDULE A-6

OTHER EQUIPMENT COST

Major Equipment Cost (Php)

Rotary Vacuum Filter 5,653,564.35

Rotary Dryer 8,480,346.53

Jacketed Stirred Tank Reactor 21,200,866.34

Fluidized Bed Reactor 2,477,500

Vacuum Crystallizer 7,308,625

TOTAL 45,120,902.22

The five equipment previously designed are the major equipment and much expensive

compared to the others.

Since the total number of major unit operations involved in the process is 17, the five

equipment previously designed are therefore equivalent to 29.41% of the total equipment cost.

0.7059
= Php45,120,902.22 ( )
0.2941

= Php108,299,371
EXHIBIT B

INSTALLATION COST

Installation of process equipment includes the labor cost, the foundation support platforms,

construction related expenses, and other factors related to the erection of the purchased equipment.

39% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.39(Php191,775,341)

= Php74,792,383
EXHIBIT C

INSTRUMENTATION AND CONTROL COST

Instrumentation and control costs include the purchase and installation labor cost of

auxiliary machines used to control each equipment. Such auxiliary equipment involve pressure

and temperature gauges or controller and flow controller of the plant.

26% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.26(Php191,775,341)

= Php49,861,589
EXHIBIT D

PIPING INSTALLED

The piping cost covers the cost of labor in its installation, cost of pipes, vaves, fittings and

all other piping related requirement for the piping erection of the facility.

31% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.31(Php191,775,341)

= Php59,450,356
EXHIBIT E

ELECTRICAL SYSTEM INSTALLED

The electrical system comprises of four major component namely, lighting, power wiring,

transformation and service, and instrument and control wiring.

10% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.10(Php191,775,341)

= Php19,177,534
EXHIBIT F

BUILDINGS (INCLUDING SERVICES)

Cost of buildings includes the cost of construction administrative offices and also the cost

of lighting, heating, plumbing, ventilation, and other similar services.

29% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

( ) = 0.29(Php191,775,341)

( ) = Php55,614,849
EXHIBIT G

YARD IMPROVEMENT

Yard improvement includes the roads, grading, fencing, sidewalks, railroad sidings,

landscaping, and any other similar items related to yard improvements.

12% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.12(Php191,775,341)

= Php23,013,041
EXHIBIT H

SERVICE FACILITIES

Service facilities include the utilities for supplying steam, water, power, and fuel for the

chemical processes and operations. Fire protection, waste disposal, and miscellaneous service

items such as shops, clinics or first aid quarters, and cafeterias require capital investment that are

included under general heading of service facilities.

55% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.55(Php191,775,341)

= Php105,476,438
EXHIBIT I

ENGINEERING AND SUPERVISION

Capital investment also includes the cost for the design of the process plant and

engineering, including all the internal or licensed software, computer-aided drafts, accounting,

purchasing, travel, and also of the plant supervisory services.

32% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.32(Php191,775,341)

= Php61,368,109
EXHIBIT J

CONSTRUCTION EXPENSES

It comprises of the cost construction labor and other construction related expenses such as

construction tools and rentals, construction payroll, construction tariffs, insurance and permits,

miscellaneous equipment installation and other fees related to the construction process.

34% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.34(Php191,775,341)

= Php65,203,616
EXHIBIT K

LEGAL EXPENSES

Legal expenses are costs related to the processing of lad purchase, equipment purchase,

and contract of construction. Understanding and proving compliance to government requirements,

such as environmental and safety measures requirements comprise most of legal expenses.

4% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.04(Php191,775,341)

= Php7,671,014
EXHIBIT L

CONTRACTORS FEE

The contractors fee is the payment given to the construction company hired for the

construction of the plant, includes the contractors fee and all other related fees.

19% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.19(Php191,775,341)

= Php36,437,315
EXHIBIT M

CONTINGENCY

A contingency amount is included in the estimation of the project cost in recognition of the

fact that unexpected events and expense that inevitably increase the cost of the project might arise

during the erection of the plant. Unwanted events such as storms, floods, transportation accidents,

strikes, price changes, errors of the estimation and unforeseen expenses may occur as such and

must have proper appropriation in the cost estimation.

37% (Purchased Equipment Delivered) from P&T, 5th Ed., Table 6-9, Solid-Fluid

Processing Plant, p. 251

= 0.37(Php191,775,341)

= Php70,956,876
EXHIBIT N

WORKING CAPITAL

The working capital for an industrial plant consist investments designated to: (1) Raw

materials, (2) Expenses for labors, and (3) Utilities

= Raw materials + Labor cost + Utilities

Schedule

Raw Material Php 1,369,990 N-1

Labor Php 1,655,843 N-2

Utilities

A. Water Php 86,633 N-3

B. Steam Php 3,350,152 N-4

C. Electricity Php 2,846,112 N-5

TOTAL WORKING CAPITAL Php 9,308,730


SCHEDULE N-1

RAW MATERIAL

Raw materials are major contributors to the expenses in a production operation. Raw

materials are those materials that are directly consumed in making the final product, this includes

chemical reactants, constituents, and additives that are included in the product. These stored raw

materials will be good for 60 days of operations.

BANANA PEEL

Price: Php1.00/kg banana peels (Reference: Saranggani Agricultural Company Inc.)

Php1.00 22,200 kg
= ( )( ) (60 days)
kg 1 day

= Php 1,332,000

CARBON DIOXIDE (CO2)

Price: Php0.40/kg CO2 (Reference: Biofuels Digest)

Php0.40 1425.02 kg
= ( )( ) (60 days)
kg 1 day

= Php34,200.48
DEIONIZED WATER

Price: Php16.03/m3 deionized water (Reference: Philippine Water Resources)

Php16.03 3.94 m3
= ( )( ) (60 days)
m3 day

= Php3,789.49

= Php1,369,989.97
SCHEDULE N-2

OPERATING LABOR

Estimating labor requirements as a function of plant capacity is based on adding the various

principal processing steps on the flow sheet. In this method, a process step is defined as any unit

operation or unit process, or combination thereof that takes place in one or more units of grinding,

extracting, fermenting, filtering, distilling, etc.

Plant capacity per day: 2913.84 kg/day

Number of process steps: 17

Minimum wage: Php481/day (Ref.:nwpc.dole.gov.ph)

Using Fig. 6-9, p. 265, P&T, 5th Ed. (Line B-average condition)

27 emp. hr Php481 1 day


= ( )( ) (17 process steps)(60 days)
day process step day 8 hrs

= Php1,655,842.5
SCHEDULE N-3

UTILITIES

The cost for utilities, such as steam, electricity, and cooling water vary widely depending

on the amount needed, plant location, and source.

WATER

Cost: Php16.03/m3 H2O (Reference: Philippine Water Resources)

From material and energy balance,

Equipment Water Required (per day)

Jacketed Stirred Tank Reactor (J-1) 180,950.61

Jacketed Dissolution Tank (E-2) 5789.79

Jacketed Cooling Tank (F-2) 7305.54

Total 194,045.94

194,045.94 kg H2 O m3 194.04594 m3 H2 O
= ( )( )=
day 1000 kg day
Php16.03 194.04594 m3 H2 O
= ( ) ( ) (60 days)
m3 H2 O day

= Php86,633.39
SCHEDULE N-4

UTILITIES

STEAM

Steam Cost Estimation

From Energy Balance:

Equipment Steam Required (per day)

Evaporator (D-3) 121,863.68

Total 121,863.68

Raw Material Cost + Boiler Cost + Power Generation Cost


=
Steam Produce

121,863.68 kg m3 Php16.03
=( )( )( 3 )
day 1000 kg m H2 O

= Php1,953.47/day

Depreciable Boiler Cost

(From PD & E, 5th Edition by Peters & Timmerhaus, Fig. B-3, p. 809)

For 7.73 lbs/s and 250 psi, Purchased Cost of Boiler = $103,000

(From PD & E, 5th Edition by Peters & Timmerhaus, Table 7-8, p. 310)

Recovery period, for industrial steam generation = 22 years


$ 103,000 0 1 year Php49.55
() = ( )( )( )
22 year 300days 1$

() = Php764.70/day

Power Generation Cost

From Hurst Boiler & Welding Company, Inc. with Capacity of 10,000 lb/hr

Boiler Horsepower (hp) = 400 hp 298.28 kW

Meralco Rate: Php7.42/ kWhr

Change-Out Period: 60 days

24 hours Php 7.42


= (298.28 kW) ( )( )
day kW-hr

= Php53,117.70/day

Then

Php(1,953.47 + 764.70 + 53,117.70)


day
=
kg
121,863.68
day

= Php0.46/kg steam

Therefore,

Php0.46 121,863.68 kg steam


= ( )( ) (60 days)
kg steam day

= Php3,350,152.34
SCHEDULE N-5

UTILITIES

ELECTRICITY

Meralco Rate: Php7.42/kWhr

Change-Out Period: 60 days

JACKETED STIRRED TANK REACTOR

P = 9 hp (6.71kW)

Operating Time = 11 hrs/day

11 hrs Php7.42
= 6.71 kW ( ) (60 days) ( ) (12 units)
day kW hr

= Php394,322.54

FLUIDIZED BED REACTOR

P = 123.91 kW (166.1hp)

Operating Time = 8 hrs/day

8 hrs Php7.42
= 123.91 kW ( ) (60 days) ( )
day kW hr

= Php441,317.86
ROTARY DRYER

P = 2.95hp (2.2kW)

Operating Time = 1.14 hrs/day

1.14 hrs Php7.42


= 2.2 kW ( ) (60 days) ( )
day kW hr

= Php1,116.56

Assuming that the Electricity Cost of the three equipment is 29.4% of the Total Electricity

Php(394,322.54 + 441,317.86 + 1,116.56 )


=
0.294

= Php2,846,112.11
EXHIBIT AA

DIRECT PRODUCTION COST

Cost (Php/kg) Schedule

Raw Materials Php 7.77 AA-1

Operating Labor Php 9.47 AA-2

Direct Supervisory and Clerical Labor Php 1.42 AA-3

Utilities Php 36.59 AA-4

Maintenance and Repair Php 20.52 AA-5

Operating Supplies Php 3.08 AA-6

Laboratory Charges Php 1.42 AA-7

TOTAL DIRECT PRODUCTION COST Php 80.27


SCHEDULE AA-1

RAW MATERIALS

BANANA PEEL

Price: Php2.00/kg Banana Peels (Reference: Saranggani Agricultural Company Inc.)

Php1.00 22,200 kg 1 day


= ( )( )( )
kg 1 day 2,913.85 kg PC

= Php7.55/kg PC

CARBON DIOXIDE (CO2)

Price: Php0.40/kg CO2 (Reference: Biofuels Digest)

Php0.40 1425.02 kg 1 day


= ( )( )( )
kg 1 day 2,913.85 kg PC

= Php0.20/kg PC

DEIONIZED WATER

Price: Php16.03/m3 deionized water

Php16.03 3.94 m3 1 day


= ( ) ( ) ( )
m3 day 2,913.85 kg PC

= Php0.02/kg PC

= Php7.77/kg PC
SCHEDULE AA-2

OPERATING LABOR

Plant capacity per day: : 2913.84 kg/day

Number of process steps: 17

Minimum wage: Php481/day (Ref.:nwpc.dole.gove.ph)

Using Fig. 6-9, p. 265, P&T, 5th Ed. (Line B-average condition)

27 emp. hr Php481 1 day 1 day


= ( )( )( ) (17 process steps)
day process step day 8 hrs 2,913.85 kg PC

= Php 9.47/kg PC
SCHEDULE AA-3

DIRECT SUPERVISOR AND CLERICAL LABOR

The cost for the direct supervisor and clerical labor averages about 155 of the cost for

operating labor.

15% (Operating Labor) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php9.47
= 0.15 ( )
kg PC

= Php1.42/kg PC
SCHEDULE AA-4

UTILITIES

TOTAL WATER COST

Cost: Php16.03/m3 H2O (Reference: Philippine Water Resources)

From material and energy balance,

Equipment Water Required (per day)

Jacketed Stirred Tank Reactor (J-1) 180,950.61

Jacketed Dissolution Tank (E-2) 5789.79

Jacketed Cooling Tank (F-2) 7305.54

Total 194,045.94

194,045.94 kg H2 O m3 194.04594 m3 H2 O
= ( )( )=
day 1000 kg day
Php16.03 194.04594 m3 H2 O 1 day
= ( 3
) ( )( )
m H2 O day 2,913.85 kg PC

= Php1.07/kg PC
TOTAL STEAM COST

Cost: PHP 0.46/ kg steam (Pre-calculated)

From Energy Balance:

Equipment Steam Required (per day)

Evaporator (D-3) 121,863.68

Total 121,863.68

Php0.46 121,863.68 kg steam 1 day


= ( )( )( )
kg steam day 2,913.85 kg PC

= Php19.24/kg PC

TOTAL ELECTRICITY COST

Meralco Rate: Php7.42/kWhr

Change-Out Period: 60 days

JACKETED STIRRED TANK REACTOR

P = 9 hp (6.71kW)

Operating Time = 11 hrs/day

11 hrs 1 day PHP 7.42


= 6.71 kW ( )( )( ) (12 units)
day 2,913.85 kg PC kW. hr

= Php2.26/kg PC
FLUIDIZED BED REACTOR

P = 123.91 kW (166.1hp)

Operating Time = 8 hrs/day

8 hrs 1 day Php7.42


= 123.91 kW ( )( )( )
day 2,913.85 kg PC kW hr

= Php2.52/kg PC

ROTARY DRYER

P = 2.95hp (2.2kW)

Operating Time = 1.14 hrs/day

1.14 hrs 1 day Php7.42


= 2.2 kW ( )( )( )
day 2,913.85 kg PC kW hr

= Php0.0064/kg PC

Since the Electricity Cost of the three equipment is 29.4% of the Total Electricity

Php( 2.26 + 2.52 + 0.0064 )


=
0.294

= Php16.28/kg PC
Total Water Cost Php 1.07

A. Total Steam Cost Php 19.24

B. Total Electricity Cost Php 16.28

TOTAL UTILITIES COST Php 36.59


SCHEDULE AA-5

MAINTENANCE AND REPAIRS

In the process industries, the total annual plant cost for maintenance and repairs ranges

from 2%-10% of the fixed capital investment, with 5% being a reasonable value. The annual cost

for the maintenance and repairs of equipment ranges from 2%-20% of the equipment cost. Charges

for plant buildings average 3%-4% of the building cost.

5% (Fixed Capital Investment) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php 820,798,459 1 year


= 0.05 ( )( )
year 1,000,000 kg PC

= Php20.52/kg PC
SCHEDULE AA-6

OPERATING SUPPLIES

The annual cost for operating supplies ranges from 10%-20% of the cost for maintenance

and repair. About 15% of the total cost for maintenance and repair corresponds to the costs for

operating supplies such as charts, lubricants, test chemicals, and custodial supplies.

15% (Maintenance and Repair) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php 20.52
= 0.15 ( )
kg PC

= Php 3.08/kg PC
SCHEDULE AA-7

LABORATORY CHARGES

Laboratory charges include the costs of laboratory tests for control of operations and for

product quality control. This cost may be taken as 15% of the operating labor.

15% (Operating Labor) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php9.47
= 0.15 ( )
kg PC

= Php1.42/kg PC
EXHIBIT BB

FIXED CHARGES

Fixed charges are also incorporated in the total product cost. These charges are fixed in

that they are not related to the activity level of the plant and continue even if the plant stops the

operation.

Cost (Php/kg PC) Schedule

Depreciation 19.31 BB-1

Local Taxes 10.67 BB-2

Insurance 2.87 BB-3

TOTAL FIXED CHARGES 32.85


SCHEDULE BB-1

DEPRECIATION

Depreciation is a charge to the revenue resulting from an investment in real property. It is

entirely reasonable that invested principal should be recovered by the investor and that project

revenues be charged to pay the principal. Depreciation is significant since it has impact on the

federal income tax liability of a corporation.

Using Straight-Line Method:

PL
=
N

Where,

P: direct initial investment

L: salvage value

Since S-L Method is used, no salvage value or scrap value may be taken (L=0)

N: length of the straight-line recovery period, in years

N=15 years, (Table 7-8, Peter & Timmerhaus, 5th Ed., p. 310)

Php579,161,530 1 year
= ( )( )
15 years 1,000,000 kg PC

= Php19.31/kg PC
SCHEDULE BB-2

LOCAL TAXES

The magnitude of local property taxes depends on the particular locality of the plant and

the regional laws. Annual property taxes for plants in highly populated areas are ordinarily in the

range of 1%-4% of the fixed capital investment.

2.6% (Fixed Capital Investment) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php 820,798,459 1 year


= 0.026 ( )( )
year 1,000,000 kg PC

= Php10.67/kg PC
SCHEDULE BB-3

INSURANCE

Liability for product safety has become a major concern for the manufacturers in recent

years, due to heightened public awareness of producers liability. For this reason, many different

types of insurance are available for protection against property loss or charges based on legal

liability. The annual insurance costs for ordinary industrial projects may range from 0.40%-1% of

he fixed capital investment. Despite the fact that the insurance costs may represent small fraction

of the total costs, it is necessary to consider insurance requirements carefully to make certain the

economic operation of a plant is protected against emergencies or unforeseen developments.

0.70% (Fixed Capital Investment) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 273.

Php 820,798,459 1 year


= 0.007 ( )( )
year 1,000,000 kg PC

= Php2.87/kg PC
EXHIBIT CC

PLANT OVERHEAD COST

The expenditure required for routine plant services are included in plant overhead costs.

Non-manufacturing machinery, equipment, and buildings are necessary for many of the general

plant services, and the fixed charges and direct cost for these items are part of the plant overhead

cost. The plant overhead cost may range from 50%-70% of the total costs for operating labor,

direct supervisory and clerical labor, and maintenance and repair.

60% (OL+DS&CL+M&R) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 274.

Php9.47 Php1.42 Php20.52


= 0.60 ( + + )
kg PC kg PC kg PC

= Php18.85/kg PC
EXHIBIT DD

GENERAL EXPENSES

Other than the manufacturing costs, additional general expenses are involved in the

operations of a company. These general expenses may be classified as (1) administrative expenses,

(2) distribution and marketing expenses, and (3) research and development expenses. General

expenses may represent 15%-25% of the total product cost.

Cost (Php/kg PC) Schedule

Administrative Cost 6.282 DD-1

Distribution and Marketing 18.10 DD-2

Research and Development 8.23 DD-3

TOTAL GENERAL EXPENSES 32.61


SCHEDULE DD-1

ADMINISTRATIVE COST

Administrative costs are expenses that an organization incurs not directly tied to a specific

function such as manufacturing/production or sales. These expenses are related to the organization

as a whole as opposed to an individual department. Salaries of senior executives and costs of

general services such as accounting are examples of administrative expenses.

20% (OL+DS&CL+M&R) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 274.

Php9.47 Php1.42 Php20.52


= 0.20 ( + + )
kg PC kg PC kg PC

= Php6.282/kg PC
SCHEDULE DD-2

DISTRIBUTION AND MARKETING COSTS

Distribution and marketing costs are expenses incurred in the process of selling and

distributing the finished products. These expenses vary widely for different types of plans

depending on the particular material being produced, other products sold by the company, plant

location, and company policies. These costs usually range from 2%-20% of the total product cost.

11% (Total Product Cost) from Peters and Timmerhaus 5th Ed., Table 6-18, p. 274.

TPC = Manufacturing Cost + General Expenses

TPC = (Variable Production Cost + Fixed Charges + Plant Overhead Cost)

+ [(Administrative Cost + Distribution and Marketing Cost(11% of TPC)

+ Research and Development Cost(5% og TPC)]

Manufacturing Cost + Administrative Cost


TPC =
0.84
131.97 + 6.282
TPC =
0.84

TPC = Php164.59

Php164.59
= 0.11 ( )
kg PC

= Php18.10/kg PC
SCHEDULE DD-3

RESEARCH AND DEVELOPMENT

Research and development is an investment in a companys future-companies that do not

spend sufficiently in R&D are often said to be eating the seed corn, that is, when their current

product lines become outdated and overtaken by their competitors, they will not have viable

successors in the pipeline.

Research and development costs include salaries and wages for all personnel directly

connected with this type of work, fixed and operating expenses for all the machinery and

equipment involved, cost for materials and supplies and consultants fee.

5% (Total Product Cost) from P&T 5th Ed., Table 6-18, p. 274.

Php 164.59
= 0.05 ( )
kg PC

= Php8.23/kg PC