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Introduction
The geographical location of the final plant can have strong influence on the success of an industrial venture. Considerable care must be exercised in selecting the plant site, and many different factors must be considered. Primarily, the plant should be located where the minimum cost of production and distribution can be obtained, but other factors, such as room for expansion and safe living conditions for plant operation as well as the surrounding community, are also important.
Cost estimation
Evaluation of costs in the preliminary design phases is sometimes called guesstimation but the appropriate designation is predesign cost estimation. The chemical engineer (or cost engineer) must be certain to consider all possible factors when making a cost analysis. Fixed costs, direct production costs for raw materials, labor, maintenance, power, and utilities must all be included along with costs for plant and administrative overhead, distribution of the final products, and other miscellaneous items.
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PROFITABILITY OF INVESTMENTS
A major function of the directors of a manufacturing firm is to maximize the long-term profit to the owners or the stockholders. A decision to invest in fixed facilities carries with it the burden of continuing interest, insurance, taxes, depreciation, manufacturing costs, etc., and also reduces the fluidity of the companys future actions. Capital-investment decisions, therefore, must be made with great care.
Depreciation
Since all physical assets of an industrial facility decrease in value with age, it is normal practice to make periodic charges against earnings so as to distribute the first cost of the facility over its expected service life.
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Profit
Planning
Investment
Marketing
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Engineering Projects
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Accounting
Past
Engineering Economy
Future Present
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Cost Reduction
Should a company buy equipment to perform an operation now done manually? Should spend money now in order to save more money later?
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Course outline
Characteristics of Chemical industry; Market survey; Plant location; Estimation of capital investment; Physical-plant cost; Manufacturing cost; General expenses; Sales and profit; Organization and management; Cost accounting; Research and development; Marketing.
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Books
Chemical engneering Economics by Donald e Garrett Plant Design and Economics by Timmerhaus
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