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Source of Equipment
One of the major costs. Standard sizes have a substantial reduction in cost. More strict limitations in design = more costly equipment.
Price Fluctuations
Prices such as labor costs and equipment costs can vary from one period to another. Need to stay on top of current prices in estimates.
Company policies
Policies of individual companies – such as safety regulations, accounting procedures and methods for allocating corporate costs, and policies with labor unions – have a direct effect on costs.
Government policies
National government has laws that can have a direct effect on industrial costs through things like tariff regulations, depreciation rates, income tax rules, and environmental and safety regulation
Operating time and rate of production
A major effect on the profits is the fraction of time a process is in operation
Sales demand, rate of production, and operating time are closely related
Breakeven Point
Cost = Income
Direct Costs
Equipment, Equipment Installation, Instrumentation and Controls, Piping, and Electrical Systems, Buildings, Yard Improvements, Service Facilities, Land
Indirect Costs
Engineering/Supervision, Legal Expenses, Construction Expenses, Contractor’s Fee, Contingency
Order of Magnitude Estimate
Class 5, Done in Step 1
Study Estimate
Class 4, Done in Step 2
Preliminary Estimate
Class 4, Done in Step 3
Definitive Estimate
Class 3, Done in Step 3
Detailed Estimate
Class 2, Done in Step 4
Check Estimate
Class 1, Done in Step 5
Manufacturing FCI
Capital necessary for the installed process
equipment with all components that are needed
for complete process operation.
Non-Manufacturing FCI
Capital required for the construction overhead
and for all plant components that are not
directly related to the process operation
Construction Overhead Costs
Includes field office and supervision expenses, home office expenses, engineering expenses,
miscellaneous construction costs, contractor’s fees, and contingencies
Working Capital
The capital necessary for the operation of the plant is the working capital (WC)
Working Capital amount
Roughly 10-20% of the TCI, but can go up to 50% of TCI for companies with seasonal products due to large inventories that need to be maintained.
