FAJRUL FALAH

03993130005
1.

The purchased cost of a shell and tube heat exchanger (floating head and carbon
steel tubes) with 100 ft2 of heating surface was $ 3000 in 1980. What will be the
purchased cost of a similar heat exchanger with 200 ft2 of heating surface in 1980
if the purchased cost index is 0.6 for surface area ranging from 100 to 400 ft 2 ? If
the purchased areas ranging from 400 to 2000 ft 2, what will be the purchased cost
of a heat exchanger with 1000 ft2 of heating surface in 1985 ?
Answer:
In 1980, cost of heat exchanger =
=

200 ft 2
$ 3000
2
100 ft

0.6

$ 4547.1497

From Marshall index, Table 3 for 1980 is 560 and 1985 is 790.
In 1985, cost of heat exchanger =
=
3.

$ 3000

790 1000 ft 2

560 100 ft 2

0.81

$ 27325.0093

The purchased and installation cost of stone pieces of equipment are given as a
function of weight rather than capacity. An example of this is the installed cost of
lange tanks. The 1980 cost for an installed aluminium tank weight 100000 lb was
$ 390000. For a size range from 200000 to 1000000 lb, the installation cost
weight exponent for aluminium tanks is 0.93. If an aluminium tank weight
700000 lb is required, what is the present capital investment needed ?
Answer:
The present capital investment =
=

4.

700000 lb
$ 390000

100000 lb

0.93

$ 2382351.199

What weight of installed stainless steel tank could have been obtained for the
same capital investment as in the previous problem ? The 1980 cost for an
istalled 304 stainless steel tank requiring 300000 lb was $ 670000. The installed
cost weight exponent for stainless steel tank is 0.88 for a size range from 300000
to 700000 lb.

Answer:
The capital investment

$ 2382351.199

Stainless steel tank weight for the same capital investment is y.

The present capital investment =

5.

300000 lb

0.88

0.88

$ 670000

$ 2382351.199

$ 670000

300000 lb

$ 1268175.0022 lb

The purchased cost of a 1400 gal stainless stell tank in 1980 was $ 7500. The
tank is cylindrical with flat top and bottom, and the diameter is 6 ft. If enteri
outer surface of the tank is to be covered with 2 in thickness of magnesia block,
estimate the present total cost for the installed and insulated tank. The join 1,
1980 cost for the 2 in magnesia block was $ 2.20 per ft 2 the labor for installed the
insulattion was $ 5.00 per ft2 ?
Answer:
Thickness of magnesia block =

2 in.

0.1667 ft

1400 gal (US)

187.1536 ft3

Volume

r2 h

187.1536 ft3

3.14 (3 ft)2 h

High cylindrical, h

6.6226 ft

Outside diameter

6 ft + 2 0.1667 ft

6.3333 ft

Volume

Area cylindrical (insullation), A =

Cost of insullation

2 r2 + 2 r h

2 (3.1667 ft)2 + 2 3.1667 ft 6.6226 ft

194.6786 ft2

Area insullation cost of insullation per area

194.6786 ft2 $ 2.20 ft-2

$ 428.2929

Cost of installation

The present total cost

6.

Area insullation cost of installation per area

194.6786 ft2 $ 5.00 ft-2

$ 973.3930

Cost of insullation + Cost of installation

$ 428.2929 + $ 973.3930

$ 1401.6859

An one story warehouses 120 ft by 60 ft is to be added to existing plant.

An

asphalt payment service area 60 ft by 30 ft will be added adjacent to warehouse.

It will also be necessary to put in 500 line ft of railroad siding to service the
warehouse. Utility service lines are aready aviabel at the warehouse site.

The

propored warehouse has a concrete floor and steel frame, wales, and roof. No
heat is necessary but lighting and sprinkler must be installed. Estimate the total
cost of the proposed addition. Consist App. B for necessary cost data !
Answer:
From App. B, we get the cost of equipment and buildings:
Warehouse with single story, 15 ft clearence, steel frame, manory wales, floor-roof,
heating, lighting and plumering =

$ 28.00 per ft2

Aspalt tile

$ 1.40 per ft2

Railroad siding track (90 lb)

$ 63.00 per line ft

Sprinkler system wet

$ 1.65 per ft2

Cost of warehouse

(120 ft 60 ft)

$ 28.00 per ft2

201600
Cost of aspalt tile

(60 ft 30 ft) $ 1.40 per ft2

2520

Cost of railroads

(500 line ft) $ 63.00 per line ft

31500

Cost of sprinkler

(120 ft 60 ft)

$ 1.65 per ft2

11880
Total cost
7.

$ 247420

Purchases equipment cost for a solid processing plant is $ 500000. The plant is
to be constructed as an additional to an exsting plant. Estimate the total capital

investment and the fixed capital investment for the plant. What percentage
and amount of the fixed capital investment is due to cost for the land and
contractor fee ?
Answer:
From the Table 17 Ratio extimating capital investment for solid processing
process with purchased equipment $ 500000.
Direct Cost:
Purchased equipment delivered

100 % $ 500000

45 % $ 500000

% $ 500000

16 % $ 500000

10 % $ 500000

25 % $ 500000

13 % $ 500000

40 % $ 500000

% $ 500000

500000
Purchased equipment installation
225000
Instrumentation and control

45000
Piping
80000
Electrical
50000
Buildings
125000
Yard improvements
65000
Service facilities
200000
Land

30000
Total Direct Cost

$ 1320000

Indirect Cost:
Engineering supervisor

33 % $ 500000

39 % $ 500000

165000
Constrution expenses
195000
Total Indirect Cost

$ 360000

Total Direct and Indirect Cost

$ 1680000

Contractor Fee, 5 % (D + I)

% $ 1680000

Contigency,

10 % $ 1680000

$ 168000

$ 1932000

10 % (D + I)

Fixed Capital Investment, FCI

84000

Working Capital, 15 % TCI

Total Capital Investment, TCI =
TCI
=

Fixed Capital Investment + Working Capital

FCI + 0.15 TCI

Total Capital Investment, TCI =

Fixed Capital Investment

0.85

Percent cost of land

$ 1932000
0.85

$ 2272941.1765

$ 30000
100 %
$ 1932000

1.5528 %

Percent cost of contractor fee =

=
8.

$ 84600
100 %
$ 1932000

4.3789 %

The purchased equipment cost for a plant which produce pentaerytric (solid fuel
processing plant) is $ 300000. The plant is to be an addition to an existing
formaldehid plant. The major part of the cost will be for indoor contruction and
contractor fee will be 7 % of the direct plant cost. All other cost are close to
average values faound for trypical chemical plant. On the basis of this
information estimate the following
a.

Total Direct Production Cost

b.

Fixed Capital Investment

c.

Total Capital Investment

Answer:

a.

From the Table 17 Ratio extimating capital investment for solid liquid
processing process with purchased equipment $ 300000.
Direct Cost:
Purchased equipment delivered

100 % $ 300000

39 % $ 300000

13 % $ 300000

31 % $ 300000

10 % $ 300000

29 % $ 300000

10 % $ 300000

55 % $ 300000

% $ 300000

300000
Purchased equipment installation
117000
Instrumentation and control
39000
Piping
93000
Electrical
30000
Buildings
87000
Yard improvements
30000
Service facilities
165000
Land

18000
Total Direct Cost
b.

$ 879000

Indirect Cost:
Engineering supervisor

32 % $ 300000

34 % $ 300000

96000
Constrution expenses
102000
Total Indirect Cost

$ 198000

Total Direct and Indirect Cost

7

% $ 879000

Contigency,

10 % $ 1077000

$ 107700

$ 1246230

10 % (D + I)

61530

Working Capital, 15 % TCI

Total Capital Investment =

Fixed Capital Investment + Working Capital

TCI

FCI + 0.15 TCI

Total Capital Investment =

9.

$ 1077000

Contractor Fee, 5 % DPC

Fixed Capital Investment, FCI

c.

Fixed Capital Investment

0.85

$ 1246230
0.85

$ 1466152.9412

Estimate by turnover ratio method the fixed capital investment required for a
proposed sulfuric acid plant (battery limit) which has capacity of 140000 ton of
100 percent sulfuric acid per year (constant catalytic process) using the data from
table 19 for 1990 with sulfuric acid cost at $ 7 per ton. The plant may be
considered as operating full time. Repeat using the cost capacity exponent
method with data from table 19 !
Answer:
Turn over ratio

gross annual sales

fixed capital investment

$ 72 per ton 100000 ton

$ 3000000

2.4000

gross annual sales

turn over ratio

$ 72 per ton 140000 ton

2.4000

$ 4200000

For capacity 140000 ton

Fixed capital investment

For Table 19 cost capacity exponent, we get for capacity 100000 ton with
cost production $ 32 per ton.
Fixed capital investment

$ 32 per ton 140000 ton

$ 4480000

10. The total capital investment for chemical plant is $ 1 milion and the working
capital is $ 100000. If The plant can produce an average of 8000 kg of fural
product per day during a 365 day. What selling price in dollars per kilograms of
product would be necessary to give a turn over ratio of 1.0 ?
Answer:
Total capital investment

$ 1000000

Working capital

$ 100000

Fixed capital investment

Total capital investment Working capital

$ 1000000 $ 100000

$ 900000

8000 day

2920000 year

Turn over ratio

gross annual sales

fixed capital investment

Gross annual sales

1.00 $ 900000

$ 900000 per year

gross annual sales

capacity

$ 900000 per year

kg
2920000
year

$ 0.3082 per kg

Capacity

Selling price

kg

kg

11. A process plant was constructed in the Philadelpia area (Middle Atlantic) at

labor cost of $ 200000 in 1980. What would the average cost for the same plant
to be in the Miami, Florida area (South Atlantic), if it were constructed in late
1988 ? Assume for simplicity that the remain labor rate and relative productivity
factor remain essensially constant !
Answer:
From Table 20, We get:

In 1980,
At Philadelpia labor cost

At Miami relative labor rate ratio =

At Miami production cost

$ 200000
0.84
1.06

0.7925

0.91
0.96

0.9479

Construction labor cost of Philadelpia Area (Middle Atlantic) to Miami Florida

Area (South Atlantic)

0.7925
0.9479

0.8361

In 1980, construstion labor cost at Miami

0.8361 $ 200000

$ 167220

$ 167220

$ 215528

From Table 3, We get index ratio:

In 1988, labor cost at Miami

870
675

12. A company has been selling soap contain 30 percent by weight water at a price of
$ 10 per 10 lb f.o.b (i.e. freight on board, which means the laundry pays the
freight charge). The company offers an equally effective soap containning only
5 % water. The water content is of no importance to the laundry and it is willing
to accept the soap containning 5 % water, if the delivered cost are equivalent, if
the freight rate is 70 cents per 100 lb. How much should the company charge the
laundry per 100 lb f.o.b. for the soap containning 5 % water ?
Answer:
For 100 lb soap f.o.b consist of 30 lb water and 70 lb soap with price $ 10 dan
70 cents for freight.
For 100 lb soap f.ob. consist of 95 lb soap and 5 lb water, 70 cents for freight
and price

95 lb soap
$ 10
70 lb soap

$ 13.5714

So the company has change to laundry $ 13.5714 for soap f.o.b. containning
5 % water.
13. The total capital investment for a conventional chemical plant is $ 1500000 and
the plant produce 3 million kg of product annualy. The selling price of the
product is $ 0.82 per kg. Working capital amounts to 15 % of the total capital
investment. The investment is from compnay fund and no interest is charged.
Row material costs for the product are $ 0.09 per kg, utilities $ 0.05 per kg and
packing $ 0.068 per kg. Distibution cost are 5 % of the total product cost.
Estimate the following:
a.

Manufacturing cost per kilogram of product

b.

Total product cost per year

c.

Profit per kilogram product before taxes

d.

Profit per kilogram product after taxes

Answer:
Total capital investment

$ 1500000

Capacity

3000000 kg per year

Selling price

$ 0.82 per kg

Working capital

15 % total capital investment

15 % $ 1500000

$ 225000

Raw material

$ 0.09 per kg

Labor

$ 0.08 per kg

Utilities

$ 0.05 per kg

Packing

$ 0.008 per kg

Distribution

5 % total production cost

a.

DPC + FC + POC

$ (0.09 + 0.08 + 0.05 + 0.008) per kg

$ 0.228 per kg

Manufacturing cost + General expence

$ 0.228 per kg 3000000 kg per year + 0.05

b.

Manufacturing cost

Total production cost

TPC

Total production cost

c.

$ 684000 per year

0.95

$ 720000 per year

Profit per kilogram before taxes

Total annual sales
Profit

Profit per kilogram

d.

$ 0.82 per kg 3000000 kg per year

$ 2460000 per year

Total annual sales Total production cost

$ 2460000 per year $ 720000 per year

$ 1740000 per year

Profit per year

capacity

$ 1740000 per year

3000000 kg per year

$ 0.58 per kg

Profit per kilogram after taxes

Assumsion Taxes

Profit

Profit per kilogram

2 % Fixed capital investment

=

2 % ($ 1500000 $ 225000)

$ 25500

Profit before taxes Taxes

$ 1740000 $ 25500

$ 1714500

Profit per year

capacity

$ 1714500 per year

3000000 kg per year

$ 0.5715 per kg

15. A company has direct production cost equal to 50 % of total annual sales and
fixes change, overhead and general expences equal to $ 200000. If management
proposes to increase in fixed change, overhead and general expences. What
annual sales dolar required to provider the same gross earning as the present
plant operation ? What would be the next profit if the expanded plant zone

operated at full capacity with the income tax on gross earning fixed 24 % ? What
would the net profit for the enlarged if total annual sales remained the same as a
present ? What would to be the net profit for enlarged plant if the total annual
sales actually decreased to $ 700000 ?
Answer:
Total annual sales

$ 800000

Direct production cost

50 % $ 800000

$ 400000

FC + POC + GE

$ 200000

Gross earning

TAS (DPC + FC + POC + GE)

$ 800000 ($ 400000 + $ 200000)

$ 200000

Assumsion the increases of FC + POC + GE is 10 %.

FC + POC + GE
a.

b.

c.

Total annual sales

Net Profit

110 % $ 200000

$ 220000

Gross earning + (DPC + FC + POC + GE)

$ 200000 + (50 % $ 800000 + $ 220000)

$ 820000

Gross earning Taxes

$ 200000 34 % $ 200000

$ 132000

Gross earning when total annual sales is the same ($ 800000)

Gross earning

d.

TAS (DPC + FC + POC + GE)

$ 800000 (50 % $ 800000 + $ 220000)

$ 180000

Gross earning if total annual sales $ 700000

Gross earning

TAS (DPC + FC + POC + GE)

$ 700000 (50 % $ 700000+ $ 220000)

$ 130000

e.

Net Profit

Gross earning Taxes

$ 130000 34 % $ 130000

$ 85800

16. A process plant making 2000 tons per year of product selling for $ 0.80 per lb has
annual direct production cost of $ 2 million at 100 % capcity and other

fixed

cost of $ 700000. What is the fixed cost per lb at the break even point ? If the
selling price of the product is increased by 10 % ? What is the dollar increase in
net profit at full capcity if the income taxes is 34 % of gross earning ?
Answer:
a.

Capacity

2000 ton per year

4409240 lb per year

Selling price

$ 0.80 per lb

Direct production cost

$ 2000000

Fixed change

$ 700000

Total production cost

Direct production cost + Fixed change

$ 2000000 + $ 700000

$ 2700000

Break even point, when total annual product cost same as total annual
cost.
$ 0.8 per lb n

$ 0.5 per lb n + $ 700000

$ 700000
$ 0.3 per lb

2333333.3333 lb

$ 700000
2333333.3333 lb

$ 0.30 per lb

Fixed cost

b.

Selling price increase 10 % =

Gross annual sales

110 % $ 0.8 per lb

$ 0.88 per lb

$ 0.88 per lb 4409240 lb per year 1 year

$ 3880131.2000

Gross earning

Net Profit

Gross annual sales Total production cost

$ 3880131.2000 $ 2700000

$ 1180131.2000

Gross earning Taxes

$ 1180131.2000 34 % $ 1180131.2000

$ 778886.5920