1. Estimating Manufacturing Costs A.K.A. Operating Costs

2. Basic Steps in the Feasibility Evaluation of a Process Design
Develop the conceptual design and flowsheet for the process.
Calculate the capital investment needed to build the plant.
Calculate the operational investment needed to run the plant.
Perform an economic analysis and calculate the break even point and internal return on investment
Compare the investment with other investment options

3. Cost of Manufacturing is in addition to capital costs
3 Types of Manufacturing Costs
Direct Manufacturing Costs
Fixed Manufacturing Costs
General Expenses

4. Direct Costs Costs are dependent on production rate Raw materials
Utilities
Labor
Waste treatment
Supplies
Maintenance
Lab Charges
Patents & Royalties

5. Fixed Manufacturing Costs
Costs are independent of or very loosely tied to production rate
Taxes and insurance
Depreciation
Plant overhead

6. General Expenses Costs loosely tied to the production rate
Sales and marketing
R&D costs
Administrative costs

7. Data Needed to Estimate Operating Costs
Fixed Capital Investment (FCI) (Total Module Cost or Grass Roots Cost)
Cost of Operating Labor (COL)
Cost of Utilities (CUT)
Cost of Waste Treatment (CWT)
Cost of Raw Materials (CRM)

8. Estimation of Direct Manufacturing Costs (DMC)

9. Estimation of Fixed Manufacturing Costs (FMC)

10. Estimation of General Manufacturing Expenses

11. Estimation of Cost of Manufacturing (COM)

12. Estimation of Cost of Manufacturing (COM)
NOTE: Use COM without depreciation and deal with the depreciation in Economics

13. Raw Material Costs Can be difficult to find Try to find recent data!
Sources:
ICIS (Formerly Chemical Market Reporter)
Prices from August 2006 given
Internet search (e.g. toluene price 2015)
Spot Metal Prices can help with catalyst prices

14. Estimation of Cost of Operating Labor (COL)
Determine Labor Requirements
(NOL = # of Operators per shift)
Determine Labor wages ~$50,000 / yr
Estimate COL

15. Working Hours of Labor Number of weeks in a year = 52
Number of weeks for vacation = 3
Number of shifts = 5/week
Hours in each shift = 8
Total hours/year = 8x5x49=1960
Total hours of operation = 24x365
The Bottom Line:
Number of operators hired for each operator needed in a plant = 24x365/1960=4.47~4.5

16. Estimating Utility Costs
Can be Difficult to Estimate
Price Fluctuations in fuel
Geographical variations
Various Choices (coal, natural gas, oil)
Try to find recent utility cost data
US Energy Information Administration is a good source
Natural Gas:
Electricity:

17. Estimating Utility Costs
Table 8.3 in text should be used as a last resort since it is old data.
(If used the prices need to be updated to current prices)

18. Estimating Utility Costs

19. Source of Utility Streams
Purchase from Local Utility
No capital cost
Use as default for a base case
Supplied by the company
utility rates may be lower than local utility
Generate and use within the process
capital and operating costs are part of the process

20. Optimum Return Temperature of Cooling Water
Trade Offs on Cooling Water Return Temperature
Less cooling water is required for larger return temperature however:
Area of heat exchanger is larger because of smaller driving force
Penalty may have to be paid if a maximum temperature constraint is violated (T > 40 oC)
Significant fouling of heat exchangers may occur at temperatures larger than 45 oC
The Bottom Line:
Optimum temperature increase of cooling water is around 15 oC.

21. Cost of Treating Wastes
Cost of treating waste streams economically driven by environmental regulations
Ethics are also a consideration
If possible design the plant with minimum waste generation
From Table 8.3