1. Chapter 8 - Estimation of Manufacturing Costs

2. Outline Estimation of costs Direct, fixed, and general expense costs
Operating labor
Utility costs
Raw materials
Waste treatment costs
others

3. Estimation of Manufacturing Costs
Direct Costs
Vary with production rate but not necessarily directly proportional
Fixed Costs
Do not vary with production rate but relate “directly” to production function
General Expenses
Functions to which operations must contribute – overhead burden

4. Direct Costs Raw Materials Waste Treatment Utilities Operating Labor
Supervisory and Clerical Labor
Maintenance and Repairs
Operating Supplies
Laboratory Charges
Patents and Royalties
These all vary with the rate of production. Some are directly proportional to production rate – raw materials, utilities, patents and royalties and others vary to a lesser extent. For example operating labor may increase only slightly with production rate.

5. Fixed Costs Depreciation – cover as a separate topic in Chapter 9
Local Taxes and Insurance
Plant Overhead Costs
These are directly related to the production process but do not vary with production rate

6. General Expenses Administration Costs Distribution and Selling Costs
Research and Development
These are “burdens or overheads” to the production process

7. Manufacturing Costs Table 8.1 Table 8.2
Description of Items
Table 8.2
Factors for Estimating Costs
* We relate (historically) the relationship between items in Table 8.1 to Direct Costs A (RM or raw material) , B (WT, or waste treatment) , C (UT or utilities) , D (OL or operating lab), and FCI (or fixed capital investment) of Plant
RM = raw materials, WT = waste treatment, UT = utilities, OL = operating labor, FCI = fixed capital investment (total module or grass roots)

8. Manufacturing Costs - examples
Maintenance and Repairs
2 – 10 % FCI
Proportional to Size of Plant
Supervisory and Clerical Labor
10 – 25 % COL
Proportional to Operating Labor
Depreciation
some % of FCI

9. Manufacturing Costs with depreciation as 10% FCI (8.1) (8.2)
The cost of manufacture without depreciation:
(8.2)
COM without Depreciation – we use this since we calculate depreciation more accurately in Chapter 9

10. How Do We Get….. FCI – Chapter 7 CTM or CGR COL CRM CUT CWT
Look At These Separately

11. Cost of Operating Labor
NOL = the number of operators per shift
P = particulate processing steps
Nnp = non-particulate processing steps – compression, heating/cooling, mixing, separation, and reaction
Important note – Above equation based on data from chemical plants and refineries where number of particle processing steps is low. For units with more than 2 solids processing steps ignore middle term and add 1 operator per solids step
Example - Acetone Flowsheet - Figure B.10.1

12. Operating Labor – Acetone Facility
Equipment
Number of
Nnp
Compressors
Exchangers 8
Fired Heaters 1
Pumps 5 -
Reactors
Towers 3
Vessels 4
Total 13

13. Operating Labor – Acetone Facility
NOL = [ (31.7)(0)2+ (0.23)(13)]0.5 = 3.05
Number of operators required for one operator per shift = (=365x24/(49x40))
= (49 wk/yr)(5 shifts/operator/wk)
= 245 shifts/year/operator
Total shifts per year = (365)(3 shifts per day)
= 1095 shifts/year
1095 / 245 = 4.5 operators (for a single shift)

14. Operating Labor – Acetone Facility
Total Operators = (3.05)(4.5) =  14
Salary = $55,000/yr (2007 gulf coast average)
COL = (55,000)(14) = $770K

15. Cost of Raw Materials, Utilities, and Waste Treatment
Flow Rates
Get these from PFD – use stream factor
Costs
Utilities and Waste Treatment - Table 8.3 – see Section 8.6 for Utilities Estimation
Common Chemicals – Table 8.4, Chemical Market Reporter,

16. Stream Factor Operating hours per year divided by total hours per year
Typical 8000 Operating Hours
0.9 – 0.95 Typical
8000/(24*365) = 0.913
Note - Flows on PFD are kmol/operating hour not kmol/hour – why?
The answer is that the equipment must be sized to handle the actual flows which are the flows per operating hour. Flows per calendar hour are smaller and therefore equipment would be undersized using this basis.

17. Utilities – Fuel and Electricity
Fuel for Fired Heaters
PFD gives process load ( energy balance) but total flow is more due to efficiency – 70-90% from Table – item 13.
Fuel Costs may vary wildly – Figure 8.1
Electricity for pumps and compressors – Figure 8.7
Shaft Power – Fluid Power/Efficiency
Power to Drive – Shaft Power/Drive Efficiency
* PFD usually gives Shaft Power – but be careful!

18. Cost of Fuel – Utility costs
This graph clearly shows the recent trend in petroleum based fuels. This data is prior to the $140 per barrel surge that occurred in 2008 so the costs for ng and fuel oil are even higher. Not the relatively stable cost of coal.

19. Utilities - Steam Pressure Levels*
Low (30 – 90 psi)
Medium (150 – 250 psi)
High (525 – 680 psi)
Available saturated but sometimes superheated
* These are the standard conditions used for the processes in the textbook – in reality, lp, mp, and hps levels will differ somewhat between plants.

20. Utilities - Steam
Large chemical complexes generate high pressure steam and use excess pressure to generate electricity – Figure 8.6.
Steam can be used as a drive medium for compressors and pumps
Thermodynamic efficiency - Table 8.5
Drive efficiency – Figure 8.7

21. Utilities - Steam
All steam generated at the highest pressure level (normally with considerable superheat) and turbines are used to reduce the pressure to other levels and generate electricity for the plant. Balancing the steam usage is an important part of the overall design for a chemical complex.
Figure 8.6: Typical Steam Producing System for a Large Chemical Facility

22. Utilities - Condensate Return and Boiler Feed Water
Steam
Process
When condensate is returned from a heat exchanger, this cost essentially balances the cost for boiler feed water to make the steam in the boiler.
Condensate returned to steam generating systems
* Just use Steam Costs

23. If Steam Lost in Process
Gas and Steam
Use Steam Cost + BFW
since Condensate is not returned
In this case the condensate is not returned but is lost and the bfw cost should be added to the steam cost.
Stripping Steam

24. Steam Generated in Process (waste heat boilers)
For waste heat boilers, just take credit for the steam generated since we assume that BFW will be recovered somewhere as condensate.
BFW
* Just Take Credit for Steam – unless Steam is lost in Process

25. Utilities - Cooling Water
Make Up and Chemicals
Evaporation + entrainment loss
30ºC
40ºC
Process
Example of how to calculate cooling water cost from the cost of process water and electricity is given in Chapter 8 of the textbook.
Purge (blowdown)

26. Utilities - Cooling Water
Make – up based on DT ( ) !
Should charge cw based on energy used
Table 8.3
45ºC is absolute max – due to fouling
Note that many salts in water exhibit reverse solubility and want to deposit out on exchanger surfaces if cw return temperature exceeds ~45C – same phenomenon as furring in water heaters.

27. Utilities - Refrigerated Water
Same as Previous Slide in that Energy Costs are not DT Dependent – but cost based on 5ºC supply temperature.
Figure 8.4 shows cost of refrigeration as a function of temperature.

28. Utilities – Refrigerated Water
Figure 8.4: Ideal Work for Refrigeration Cycles as a Function of Refrigeration Temperature

29. Summary
Basic approach is to account for all the costs associated with the operation of a chemical process. An estimate of all these costs can be made with a knowledge of
FCI
COL
CUT From these get COMd – these can be calculated using CAPCOST
CWT
CRM

30. On the Utilities Summary of CAPCOST, each piece of equipment that may use a utility is flagged. For drives (compressor) and pumps, the electrical load is calculated. For fired heaters and exchangers the utilities must be specified. For example the exchanger above is using mps at a rate of 10,000 MJ/h. This data is input and the yearly utility cost is calculated.
Note – for utilitiy generators such as a waste heat boiler use a negative duty (negative cost = revenue)

31. Likewise, other equipment are added and the annual utility costs is calculated. Note that in the users section of the CAPCOST program, the user may specify the efficiencies of the different equipment and the cost of different utilities as shown on the following slide

32. Unit costs for utilities
All these values may be changed by the user to customize a process
User specified equipment efficiencies
Cost of labor