ENCH 421 Lecture 3: 3 Cost Estimation
25 Apr 2016
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Ener 400, enpe 423, ench 423: cost estimation. In this section we will learn to estimate the many cost items that are considered in a plant design project. Cost estimation is an important part of a plant-design, because it directly affects profitability. Manufacturing costs (i. e. operating or production costs) Costs are usually classified as variable costs (raw materials, utilities, effluent treatment), which change directly with production rate, and fixed costs (cca, operating labor, maintenance, legal, interest, r&d etc), which do not. Annual profit = revenue total operating costs cca. Since all costs do not occur at the same time, consider the relationship of various cost items with time. To depict how various cost and profit items are going to be related for the entire life of a project we use a cumulative cash flow diagram , as shown in fig 6-2. Cost estimates should be of sufficient accuracy to help in decision making.
