PROC DESIGN&ANALY WPS 416
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This 66 page Class Notes was uploaded by Emiliano Gutkowski on Thursday October 15, 2015. The Class Notes belongs to WPS 416 at North Carolina State University taught by Orlando Rojas in Fall. Since its upload, it has received 10 views. For similar materials see /class/223792/wps-416-north-carolina-state-university in Paper Science And Engineering at North Carolina State University.
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Date Created: 10/15/15
NC State University WPS 416 1 Basic Principles of Finance NC State University Four Lectures on Capital Investment Basic Principles of Finance The language of Finance Basic Principles of Capital Investment Why we M invest money to make more money The Base Case for a Capital Project An assessment of the Financial performance of an Enterprise on a Status Quo basis An Example of evaluating a new capital investment Real live case of a 50000 tpy upgrade of an existing papermachine Carolina Pulp and Papy Company 3 3 Carolina Pulp and Paper Company Primary Biological Clarifier Treatment Hardwood gt Uncoated Digester Washers Bleaching Pulp Storage PaperTaChine V k Woodyard AL H Uncoated Hardwood Hardwood Hardwood Softwood Softwood Softwood Softwood Digester Washers Bleaching Pulp Storage gt Papemzlachine Chlorine 391 Dioxide Cut Size 39 Generation 7 Sheeters Lime Kiln Calcining Energy Recausticizingl chem Maintenance Operating Materials n i Microsoft Excel Carolina Pulp and Paper Co V15 le Edit Mew insert Fgrmat Iools Qata window elp 50 391 Mal vl4v Bzu EEEiIIIIIIE tuE 3 V 3352 39EE39EE 5 9 LE Flowsheet v r 40 47 A D i E F a H l J I K i L 1 to r 2 Elm mun hamm Immm i mm L V 5 6 Carollna Pulp and Paper Co V15 A 10 r L V Rounduood BIDIDQI 3I 1 Chip Treatment WC Unnd Haste j lt ff 3 6 7137 3 Hardtrood Hardwood DoEop Harduuod Uncoated 1 Digesrer 39 Bleaching 39 Pulp Storage Papormachin bl Je quot quot quot gtlt H m o r 13 A Softwood Sortnod ODoEnpD Soft00d VUncoared 21 39 39 Digester Vashers Bleaching Pulp Storage Papermachine 2 239 H 23 Power Black Liquor Bulgize39sheels 21 Generation Evaporation 35 t 78 BarllGas Coal Black Liquor g7 Combustion Combustion Combustion i 28 E I i 31 V39 CamibaEglpj iEapj L x FlowsheetLlygtmp gn DLaw39 Di AgtoShapesv El O 412 3 39 v Av I4 4 r Ready LU NUM EH V 7 Microsoft Power 3 G 35 y 6 ji gt 750PM quot b a wii Thursday 3152097 NC State University An Enterprise exists for only two reasons 1 Make money now 2 Make money in the future There are many other things an Enterprise m do but these are things it must do or otherwise it will not survive NC State University Foundations of successful businesses Mm quotWe Now Make Moneiii 39 lltllre Profitability Organization Operational Effectiveness Excellence Engaged Work Investment Employees Systems Decisions NC State University Finance has a unique language that must be learned and understood Many terms are not familiar to those who have not been trained in the language Many nancial terms are familiar but we must know precisely what they mean NC State University How do we know if we are making Money now We use the term Return on Investment to determine current performance NC State University How do we know if we will be making Money in the Future We use the term Free Cash Flow to determine future performance NC State University We normally speak of Finance in three areas m Basic activities of The commitment of The provision of an Enterprise that Funds in order to Funds from internal generates Revenues achieve an economic and external sources and Costs return over a period to fund the of time Operations and Investment activities of an Enterprise An Enterprise is a business that generates and accounts for Revenues Costs and Investments size does not matter NC State University The three parts of any business Investment F39quotaquot 39quot9 Selecting and Selecting the Best making sound Funding Options investment commitments Operations Operating Safely and Efficiently Operations 1 Profit Revenue Cost Volume X Price Direct Costs Related to Volume Indirect Costs More or less Fixed Example The ABC company produces 20 Widgets each year They sell for 15 each My cost to produce each Widget is 5 pay 100 per year to pay for labor maintenance overhead and financing costs What is my Profit Profit Revenue Cost Direct 0 3 Revenue Vo eX Prlce Relatedto NC State University Direct Cost 2 Cost M X E Indirect Cost Ton Year Costs directly incurred in the production that are 3 39 D39reCt cost more or less proportional to the Volume Produced Direct Costs Freight Fiber Energy Chemicals Finishing Materials NC State University Examples Direct Costs Freight Producer pays freight to the Customer Fiber Wood Purchased pulp eg deinked Energy Energy purchased bark gas oil Chemicals Chemicals size filler caustic chlorate Finishing Materials Finishing Materials wrappers banding NC State University Indirect Cost 2 Cost M X E Indirect Cost Ton Year 3 Indirect Cost Costs incurred on an annual basis that are more or less independent of the Volume produced Indirect Costs Labor and Benefits excluding repair Operating Materials Repairs Other Mill Fixed Depreciation Business Overhead Corporate Overhead NC State University Examples Indirect Cost Labor and Benefits excluding repair Operating Materials Repairs Other Mill Fixed Depreciation Working Capital Business Overhead Corporate Overhead Includes all people employed at millsite repair excluded but captured under Repairs Felts Wires consumed in manufacturing Labor Materials Contractors Insurance Taxadvantaged cost to replace assets Inventory Cost of Raw Materials amp Product Cost of sales people business management Legal Finance corporate management Iv Operations 1 Profit Revenue Cost We must speak of Profit as either Before Taxes After Taxes NC State University Profitability Flow Cycle Net Operating Margin Operations D39 tC t Profit after Tax gt mm 08 gt Indirect Cost Profit before Tax m Profit after Tax NC State University Finance has a unique language that must be learned and understood NC State University Depreciation The decline in the Value of an asset either by wear and tear or by technical obsolescence Recognized in accounting and for income tax purposes as a write off against income of a portion of the original cost of the asset Applies to all assets except Land The accounting lifetime example 20 years may be completely different than the actual lifetime There are a number of schedules for depreciation that can be used at the discretion of the accountant We normally take the highest or fastest writeoff period possible in order to minimize the cash outlay for income taxes NC State University Example An Investment of 1000000 is made in Year 0 Asset Lifetime 5 Year 0 0 200000 200000 200000 200000 200000 0 Years Accumulated Asset Value 1 000 000 800000 600000 400000 200000 0 23 0 NC State University Example An Investment of 1000000 is made in Year 0 Modified Accelerated Cumulative System MACRS Annual Depreciation 0 100000 P 0 900000 360000 39 540000 216000 324000 129600 F 194400 r 77760 ye 116640 ars 194400 NC State University Why is this important Example at Year 2 SIL Revenue Cost of Goods Sold Depreciation Earnings before Tax Tax at 35 Earnings after Tax NC State University Concept of Cash Flow Example at Year 2 SIL MACRS Revenue 6000000 6000000 Cost of Goods Sold 3000000 3000000 Depreciation 200000 360000 Earnings before Tax 2800000 2640000 Tax at 35 980000 924000 Earnings after Tax 1820000 1716000 Cash Flow NC State University Cash Flow 1 Profit RevenueCost 4 After Tax Profit 1 Tax Rate X Revenue Cost 5 Cash Flow After Tax Profit Depreciation NC State University Profitability Flow Cycle Operations gt Direct Cost Indirect Cash Cost Profit before Tax Profit after Tax Cash Flow NC State University Finance has a unique language that must be learned and understood NC State University Return on Investment 6 Capital Employe Asset Value Working Capital 7 Asset Value Sum of all capital investments minus Accumulated Depreciation 8 Working Capital Value of Raw Material and Finished Goods Inventories NC State University Annual Depreciation Accumulated Depreciation 0 200000 200000 200000 200000 200000 0 600000 800000 1 000 000 Asset Value 1 000 000 800000 600000 400000 200000 0 31 0 NC State University Example History of Capital Investment Asset Value I Accumulated Depreciation 80 1200 70 60 50 40 600 30 20 10 0 0 1986 1990 1994 1998 2002 Millions Millions 1000 800 Asset Value Capital Investment 400 200 O z E o a L o a D 39c a 4 g s E s o 0 lt1 Accumulated Depreciation Capital Investment Asset Value NC State University Example of Working Capital Softwood Hardwood Other Inventory Value at Total Inventory Value Days Inventory Unit Volume Inventory Value Total Value Product Inventory 45 726 69841747 96154 Tons Wood Inventory 17744 Tons 2670 473786 67766 Tons 3356 2274346 18147470 90737349 NC State University Return on Investment Accounting Definition 1 Tax Rate X Revenue Cost Capital Employed Capital Employed Return on Investment ROI NC State University Return on Investment Strategic Definition Revenue 10 Capital Turnover Capital Employed A measure of the Sales generated by Capital Investment Profit 11 Operating Margin Revenue A measure of the Profitability per Unit Sales Return on Investment Strategic Definition 9 ROI 1 Tax Rate X Revenue Cost Capital Employed 12 ROI 1 Tax Rate X Profit X Revenue Capital Employed Revenue 13 ROI 1 Tax Rate X Revenue ro I Capital Emplo Revenu 14 ROI 1 Tax Rate X Capital Turnover X Operating Margin NC State University Finance has a unique language that must be learned and understood Working Capital Income Statement Asset Value Capital Employed Return on Investment Free Cash Flow Capital Turnover NC State University Profitability Flow Cycle Operations gt Direct Cost Indirect Cash Cost Profit before Tax Profit after Tax Cash Flow NC State University Income Statement Cost 4 4 Sales Gross Profit Overhead 38 MM gt Depreciation Taxes 4 Net Sales 491496500 Cost of Good Sold 321167947 Gross Margin 170328553 Net Profit SGampA 38438672 Depreciation 69164260 Earnings before Interest and Tax 62725622 TaX 35 21953968 Net Income 40771654 Cash Flow Statement Depreciation 69164260 C 5t lt Sales Cash Flow 109935914 321 MM Operatlons Capital Investment 37284431 Free Cash Flow 72651483 Capital Employed 576616377 AW 369 6616 the Emile gf w 666 ier 73 MM AK Free Cash Flow AK Overhead Gross Profit 1 Net Profit Depreciation NC State University Finance has a unique language that must be learned and understood Many terms are not familiar to those who have not been trained in the language Many nancial terms are familiar but we must know precisely what they mean NC State University Homework for March 20 midnight Completion Go to Carolina Pulp and Paper Company Model V15 Trace the cells that set the Roll Offset Selling Price for 2005 in the Income Statement Tab This will take you to the Revenue Tab Change the price of paper in 2005 to 750 per ton Find the Display Test Results Tab You should have a different set of Financial results from those shown in this le Change the numbers on the Funds flow diagrams on pages 3940 and send just these two pages to me at richard phillipsdncsuedu before midnight Tuesday night Estimation of Total Product Cost and Revenue Analysis of Cost Estimation Sr 87 J r l5 generally 35 of gross profit preciallon charg 5 Total income 39om Operations for sales complete prolecl including depreciation x nonr Total capital manufacturing lnveslmen fixed capital Wit ou land A sj on dim p dj direct plant expenses raw materials labor utilities indirect expenses administrative salaries product sales distribution costs 4 sj co dj1 Net profit after taxes sj co dj Income taxes H j is generally 35 of gross pro t 39 39 39 39 39 39 39 39 quot V x foggreciifionicirrge sj co dj Gross profit if 5 Total income from Operations for J r sales complete prolect Co Costs for sjcoj Gross profit before operations not depreciation charge including ff depreciation L Raw materials and labor Ax non Total capital manufacturing Investment fixed capital without investment for land 03quot project TWAXV soy a A Net cash flow from Repayment of E he project including borrowed capital depreciation charge x A 51 co dj139 d A 5 c 1 d Other Mstockholders 1 oil J91gt investmentslt15 v A Capital 39 f n source and sink Other capital input Loans Bonds Preferred Stock Cash ow for industrial operations Common stock Estimation of Revenue Estimated simply by multiplying total amount of product sold by sales price not rocket science A plant is designed for a specific rate of production of the major product Rate of production of other products by products is determined by the chemistry and operating characteristics Revenue Generation A plant is designed for a specific rate of production the engineer establishes the actual production rates as a fraction or percentage of the design capacity Common practice use 50 for the first year of operation startup period After the first year it is common to use the design annual capacity Revenue Generation The trick is estimating how much product will actually be producedhow many days Typically a downtime of 1020 is considered based on 24 hday 7 days week 52 weekyear For 416 our basis will be 335 days two weeks planned outage 95 uptime reliability Estimation of Total Product Cost Consists of 1 manufacturing costs and 2 general expenses Manufacturing costs also known as operating or production costs 1 Manufacturing Costs Made up of several very different components Direct production costs variable costs are directly associate with production and vary according to production rate Indirect costs fixed costs are not dependent upon rate Overhead costs are associated with the running of the facility an mulennls Opcl aling lubrir Upcrallng supervisinn llli as Electricity u Refrigcm un m quot1 Wm lrealmelll and dispcsnl cuss Labelawry c algcs Ruyallics ifnm all lumprsum basis Caralysu and nnlvunu Depmciariml Thus prop Financing inlcrcsl Insul ancc Rem cdiczll afcty and pmtccliml xcnsml plum overhead Warhead a vag r calm lahnmmries 14ml supzrinlandnnc Image fzcilkies Executive salaries Clerical wages Enginwring Legal cosh Of ce maintenance Cnmmuniumiulls Sales nf ms Sales pelsmmll Expanses sni pin Advertising Tncnnical sales snrvicc Remand nnrl duvulupmenl Figure 51 39 Dunkl w l Sublnllll Vnri bll lmlluulion mu Subtotal Fixed charges Subluml Plum overhead costs Tum of ahuvts Manulaauring costs Submlal Adminislralivc axpullsel Suhlounl Dislrihuliun and Inclrkaljrlg cxpcmcn Tolzll of admmslmlive distribution Opcnl quotg lime liyr Capnclryr kgyr Suggnlcd factor Raw lnrllcnrlls 2 3 onernung lzlbor39 1 lg supervislnll 0 l5 Ul lllusr wmcr Cwll an cs Elcclricny Fun Rcfngcmuml S emu W ulu Hulllmcnl rind disposal Milinlcl39lullcc nnrl rcpulm n 07 Operal lng supplie o ls Luhnmln quotgm uls Roynhies llol on lumpsum buslsl um Cnnuyu um sulvcuu Run or 39ml per 7 c quunllly per or qunmlly 3w nnu Cup Mum Cnnin g1 lecd Cnnunl lngtnlln llCli Um variables x L nlcuImLrl vnluu sM 1hlul 7 ufupcm ng lulmr of F I of mnlmennnm nilu rup ln ofupcnlung lrlbut 0mm 0 ul depmciminn 39thnl vnrluhln pmrlucliun msls hepmda ungcnlcululcd winiluly buluw Taxcswm m 002 MFG Flnanunglinu 000 ofFCl Illslln c39 mu anCl Rum 000 nrlrl Dcpl39cciminn m Fiml charges Chap 7 kn LILmich Plum uvcrhcilll cosh DEmelmi Your ul FCI Adminisu mivc casts Disuiburlon nmkclln m M cash Rcilmlcll llnd ueiclnprnunl if l 20 1 32 i 191 J l i 5 5 7 0 U Gumml urnmm Tnml pmdurl cnsl wininul dcnmclzllnlll and markunng Tum oral abovl Tomi product cos Figure 55 Splcudxhcul rm hr lryear anl39lunl mml prnuucl cost for IOO percem cnpncity Variable Cost Examples Raw materials Labor Utilities Maintenancerepairs Supplies Lab testing Royaltieslicensing fees Cost of Common Chemicals from Marketing Chemical Reporter Nov 1993 Cost Typical Shipping Capacity Chemical kg or Basis for Price Acetaldehyde 100 Railroad Tank Cars Acetic Acid 073 Railroad Tank Cars Acetone 075 Railroad Tank Cars Acrylic Acid 159 Railroad Tank Cars Allyl Alcohol 220 FOB Gulf Coast Allyl Chloride 172 FOB Gulf Coast Benzene 027 Barge Gulf Coast Chlorine 025 Railroad Tank Car DiMethyl Ether 095 Railroad Tank Car Ethanol 190 Proof 062 Railroad Tank Car Hydrogen Chloride anhydrous 033 Railroad Tank Car Works IsoPropanol 99 079 Railroad Tank Car 91 070 Railroad Tank Car Methanol 016 FOB Gulf Coast Methyl Ethyl Ketone 088 Railroad Tank Car Propylene Polymer Grade 030 FOB Gulf Coast Chemical Grade 028 FOB Gulf Coast Sulfur Crude 0053 Railroad Car Sulfuric Acid 0075 Railroad Tank Car Gulf Coast Toluene 024 Barge Gulf Coast Mixed Xylenes 025 Barge Gulf Coast OrthoXylene 093 Railroad Tank Cars ParaXylene 035 Railroad Tank Cars MetaXylene 046 Railroad Tank Cars Yearly Costs Usually report manufacturing costs per year Must know the operating time per year Often a process is shut down for maintenance for 2 weeksyr The stream factor SF accounts for this numberof daysplantoperatesin one year 365 SF 2 096 or 1esscommon1y Must ensure when sizing equipment to base it on stream days and not calendar days Cost of Operating Labour Use the following table to estimate the number of operators per shift Usually an operator works 49 weeksyear 5 8 hour shifts per week Assuming plant operating 24 hoursday 365 daysyear 1095 shifts per year 1 operator works 49x5 245 shiftsyear So 45 operators are required for each position Table 33 Operator Requirements for Various Process Equipment from Ulrich G D A Guide to Chemical Engineering Process Design lt and Economics Wiley New York 1984 Copyright 1984 John Wiley amp Sons Inc reprinted by permission of John Wiley 8 Sons Inc Operati ng pressings Auxilia Facilities Labour out w Boilers 10 Chimneys and Stacks 00 Coolin Towers 10 The cost of an operator in the f g f fgmm 2 US was about 46800year in portablesiecsiccenerasngms 05 1996 However this value varies g 33 significantly x 5 2 The labour cost index tends to Water39rreannemmants 2390 grow more quickly that that for P e qquotquotquotquot39equott equipment Oil and Gas Journal 5223 335 and Engineering News Record Estes 335 give the required indices BlowersandCompressors 015 However labour is usually a Kim 325 small part of the total cost and 13ij 32 as such CEPCI is usually good Reactors 05 e n O u g h I gaspares such as compressors and pumps just count equipment Table 613 Typical labor requirements for process equipment Type of equipment Workersunitishift Blowers and compressors Centri lga separator Ciyst llizer mcchanical Filter plate and nuns Filter rotary and lack Heat exchangch Process 39E 15 lowers including auxiliary pumps and exchangers Reactor bench 10 Reactor continuous 05 lnlm i D ULrich A Guidr In Chemical Engineering l mmixv lw rui Uexign mid EL39Umum39cs J Wiley New York 1984 Plant capacity tonsday 10 102 103 Multiple small units fnr increasing capacity or completely batch operations 1 Average conditions Large equipment highly automated or uid processing only Operating labor employee hoursdayprocessing step 5N 10 103 10 105 105 Plant capacity lagday Figure 69 Operating labor requirements in the chemical process industry Table 614 Cost tabulation for selected utllltlss and labor Utility Cost Elccuiciiy 0043 5kw1i Cha 035 061quot l clmlcum 150 GJ Petroleum coke 017 001quot Gus 126 301 Refrigeration in L mpcr39dlm39u 5 C 200 1101 20quotC 320 way 40 C 600 PSIGJ 31mm samraied 10 7104 kPa 150 1500 psi 440 51000 kgm Wusiewmer Disposal 053 51000 kg Tiemmem 053 51000 kg Wink Huunlm 14500 31000 kg 3600 31000 kg is Nollhazm39dous 008 151000 kg er Cooling I m63 053 501000 kg nr Skilled 3367 V11 Com 2558 510 K Y r nn H nk II39ITHIYPVI39 TFn H 1 7m HQ 2 b Eascd R Tunaquot R C Bailie PnL39cncs PremiceeHulI 111m 39hnnln i rm vii n i Flndugui39 iv 1 iii 1n fM1 S Pciers and K D Timmu haus Pin11 Dmi39gn and Economics New York 1991 Euginzm39ing NewsRecord Indexes Dcccmbcr 2001 van 2000 on 05 Dcparlmnm oi Encrgy Enmgy Inl39m39muuun Adll iijslmlion form iiix4048 mm us average for ycnr 2000 w B Whining and J A Simeiwiiz Amiyin Synllxcxix and Design q CHEHull upper Saddle River N1 199 quot 39 r i n 0071020001 1 15 December 2000 T M40 9795310nc 2001 or Chmital Engineers 40 ed MCGI IIW HIH Table 615 Engineering NewsRecord labor indexesquot Cumnon labor Skilled labor Location 1997 1998 1999 2000 2001 1997 1998 Anemia 6305 6303 1563 7195 7326 3623 5698 Ballimore K 3 S 2 2 8745 8745 458 467 Birnnnghum 7853 linslun H605 Chicago 13974 Cincimmu I 84 lcvclund 277l Dallus 6517 Dunver 7739 Dam 13068 Kansas Chy 1 162 0 es H011 M39n 13368 6842 N w York 9284 Philadelphia H605 I mshurgh 11884 SI Louis 13726 Sun Franciscn 14157 Scan 14026 Montreal 12375 um 11 15570 Ndlionzll labor inch H835 Wages Mb 2248 Publlalmd 111 December iwm nl39 Angina ng Nvlvvkecurd whh punninluu 1mm Engim ming Mm Renard McGrnwHxll New York 1Index 7 11101111913 Table 61 6 Estimation of costs for maintenance and repairs quotMaiintenance crist as percentage of xedcapital investment on annual basis 7 Type of operation L Wages 39 Materials Total Simple chemical processes 1 3 1 3 2 6 Average processes with normal 2 4 3 5 5 9 operating conditions Complicated processes severe corrosion 35 4 6 7 1 1 operating conditions or extensive instrumentation Fixed Cost Examples Depreciation Financinginterest Local taxes Insurance Rent Overhead Cost Examples Machinery equipment buildings not involved in production but not in administration Plant upkeep Payroll overhead Medical services Security services Table 617 Estimation of capital investment cost showing individual components Tl percentages indicated in the zlhm39ing rummnry ufllic variant trusts minimizing the capital lnverlmt39nl we t39ipprm39imtrinnr npplirnblt m un39linnrv Chemical processing plants I slumI be realized that the values given vary depending on manyfmxmrr SHEl as plant lnmtimi type nipveers and cumplnxiry Ifinrzrttmenm mt I Ill IV V Direct costs material and labor involved in actual installation of complete facility 6545 of xedicnpital investment Equipment installation instrumentation piping electrical insulation painting 50 60 of xed capital investment 1 Purchased equipment ii 40 of xed capital investment 2 Installation including insulation and painting 2545 of purchased equipment cost 3 Instrumentation and controls installed 8 50 of purchasedequipment cost 4 Piping installed 10 80 ot39purchased equipment cost 5 Electrical installed 104090 of purchasedequipment cost B Buildings process and auxiliary 10 70 ot39purchased equipment cost C Service facilities and yard improvements 40 100 of pttx chasedeqttipt rtcnt cost D Land l 2 of xedcapital investment 0139 4 87 of purchased equipment cost Indirect Costs 2 expenses which are not directly involved with material and labor of actual installatinn of com plete facility 1573570 ot39 xedcnpitul investment Engineering and supervision 5730 70 0139 direct costs B Legal expenses l S Z of xedicapital investment C Construction expense and contractor s fee LZO yu of xedcapital investment D Contingency 545 of xcdicapitu investment Fixedcapital investment direct costs indirect cnsts Wurking capital 040 of total capital investment Total capital investment xed capital investment working capital 2 General Expenses Table 618 Estimation of total product cost showing individual components The percentages indimled in Ihefoll39un mg stunmmjr Zfllu39 various cos5 involved in the rumdole operation of Imutnnt mring plan are appmA39t39matimin applicable Ia ntziinun i39liemit u pm using planr II tlmttltl39 be runIliad Iltul flf39 mine1s git39mi um depending mt mmtyfuclnm ruet ur pintr lumrion type ul39pmress tmd rnntpuny puiieim 1 Manufacturing cost direct production costs xed charges plant overhead costs Direct production costs about 66 01 total product cost Raw materials ill 80 of total product cost Operating labor 10 20 of total product cost Direct supervisory and cleu39eal labor 10 20 of operating labor Utilities I0 20 of total product cost Maintenance and repairs 240 of xedcapital investment Operating supplies 10 20 of maintenance and repair costs 0139 054 of xedcapital investment Laboratory charges Ill 20 of operating labor Patents and royalties L6 of total product cost Mvtu PCNP F T 39ixed charges 1 10 20 of total product cost Depreciation depends on method of calculation see Chap 7 Local taxes 14 of tixed capital investment Insurance llPl 70 of xedecapitul investment l 2 Rent 8 12 of value of rented land and buildings Financing interest 0 1070 oftotal capital investment Plant overhead costs 50 70 of cost for operating labor supervision and maintenance or 545 of total product cost include cosLs for the following general plant upkeep and overhead payroll overhead packag ing medical seniCCs safety and protection restaurants recreation salvage laboratories and storage filClllliL 0 Ln II General expenses administrative costs distribution and selling costs research and dexelopment cosh ts25 of the total product cost A Administrative costs about 11397r of costs of operating labor supervision and maintenance or 2592 ot total product cost include costs for executive salaries clerical wages computer support legal fees ol39tice sup plies and communications Bl Disuibution and marketing costs tZ ZOCr of total product cost include Costs for sales of ces salespeople shipping and advertising Ct Research and development costs 35 of every sales dollar or about 571 of total product cost 111 IV Gross earnings cost gross earnings total income A total product cost amount of gross camings cost depends on amount of gross earnings for entire company and income tax regulations a general range For gross cttrni gs cost is 15 10 of gross earnings Total product costt manufacturing cost i general expenses YlILleSired a contingency factor can be included hy increasing the tonal product Cual by l S39fr
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