Académique Documents
Professionnel Documents
Culture Documents
ACKNOWLEDGEMENT.............................................................................................................04
ABSTRACT ..................................................................................................................................05
1 INTRODUCTION.............................................................................................................06
4 PROCESS DESCRIPTION...............................................................................................12
4.1 Preheating.....................................................................................................................12
4.2 Fractionation................................................................................................................12
1
6 UTILITY REQUIREMENT..............................................................................................17
6.1 Power...........................................................................................................................17
6.2 Cooling Water..............................................................................................................17
6.3 Steam............................................................................................................................17
6.4 Air................................................................................................................................17
8 COST ESTIMATION........................................................................................................19
9 INVESTMENT ANALYSIS.............................................................................................22
9.1 Return on Investment....................................................................................................22
9.2 Payout Period...............................................................................................................23
10 SAFETY............................................................................................................................25
10.1 Definition...................................................................................................................25
2
11 PLANT LAYOUT.............................................................................................................29
12 DISCUSSION....................................................................................................................30
13 CONCLUSION..................................................................................................................31
REFERENCES..............................................................................................................................32
APPENDICES...............................................................................................................................33
Appendix A........................................................................................................................33
Appendix B........................................................................................................................34
3
ACKNOWLEDGEMENT
We express our profound gratitude to our Project Supervisor, Dr. Engr. Salma Akhter, Professor,
Chemical Engineering and Polymer Science(CEP), SUST, Sylhet for his constant supervision and
valuable guidance. This small endeavor would not have seen the light of the day without his
constant support, fruitful discussions in various capacities.
We would also like to extend our whole-hearted thanks and gratitude to the coordinator of this
course (CEP-418) Ms. Rahatun Akter, Lecturer, CEP, SUST for explaining to us the project work
and also necessary requisites for the same.
Our special thanks also goes to Mr. Suman Bikash Das, Chief Engineer, Rashidpur Condensate
Fractionation Plant for allowing us to visit the plant and rendering necessary information.
We would also like to thank Riazul Islam, Assistant Engineer, Rashidpur Condensate Fractionation
Plant for his kind help.
4
ABSTRACT
A successful chemical engineer in this modern age of national and international competition needs
more than a knowledge and full understanding of the fundamental science and related engineering
concepts of material and energy balances, thermodynamics, reaction kinetics, mass transfer and
different simulation software. The engineer must also have to apply this knowledge to practical
situations to initiate and develop new or improve process and products that will be beneficial to
society. However, in achieving this goal, the chemical engineer must recognize the economic,
environmental and ethical applications that are involved in such developments. Keeping in these
mind, the “Plant Design Sessional” course is included in our academic syllabus. This course is
designed to challenge chemical engineers to combine basic knowledge from other courses and
principles and tools for process design with practical elements of economics, business practices
and organization along with principles of safety, environmental and sociological issues to design
an integrated chemical process plant. As a part of this course we are proposing a condensate
fractionation plant named “Kushiara Condensate Fractionation Plant” of a production capacity of
4000 bbl./day. The steady state simulation of condensate fractionation plant is carried out using
Aspen Hysys8.8 Process Simulator.
5
1 INTRODUCTION
1.1 Definition of Process Design
The plant design project involves a small group of students working as a team to design a
nominated chemical plant. The tasks include the study of the available processes, process selection,
calculation of material and energy balances, preparation of flow sheets, design of selected plant
items, an assessment of factors affecting plant safety, sustainability and environmental impact,
estimation of plant cost and process economics, preparation of a design report and drawing of the
plant layout.
6
1.4 Composition of Natural-Gas Condensate
There are hundreds of wet gas field worldwide and each has its own unique gas condensate
composition. Natural gas condensate is typically composed of hydrocarbons ranging from C 4 to
C15 in which mainly contain 25-95 % by wt. of C6, C7 and C8 organic compounds. In natural gas
condensate comprises hexane, cyclohexane and benzene as C6 hydrocarbon; heptane and toluene
as C7 hydrocarbon whereas octane, ethyl benzene and xylenes consider as C8 hydrocarbon. Natural
gas condensate also has minor amount of C5 (5-7% by wt.) as pentane and other hydrocarbons up
to C15. Beside these gas condensate has trace amount of hydrogen sulfide (H2S), carbon dioxide
(CO2), mercaptanes (RSH, R= -CH3, -C2H5) and aromatics. In general, gas condensate has a
specific gravity ranging from 0.5 to 0.8.
I Lease condensate: Raw natural gas that comes from crude oil wells is called associated
gas. This gas can exist separate from the crude oil in the underground formation, or
dissolved in the crude oil. Condensate produced from oil wells is often referred to as lease
condensate.
II Plant condensate: Dry gas wells typically produce only raw natural gas that does not
contain any hydrocarbon liquids. Such gas is called non-associated gas. Condensate from
dry gas is extracted at gas processing plants and, hence, is often referred to as plant
condensate.
7
1.7 Product Application
Gasoline:
Serves as a popular cleaning agent.
Its primary use is as transportation fuel.
Works as a camping fuel.
Used in portable generators to generate emergency electricity.
Used in industries that depend heavily on gasoline such as companies that
manufacture pesticides, insecticides and fungicides.
Diesel:
Diesel fuel is commonly used to fuel public buses and school buses.
The construction industry depends on the power provided by diesel fuel.
The military uses diesel fuel for tanks and trucks because diesel fuel is less
flammable and less explosive than other fuels.
Diesel fuel is also used in diesel engine generators to generate electricity.
Many industrial facilities, large buildings, institutional facilities, hospitals and
electric utilities have diesel generators for backup and emergency power supply.
Kerosene:
It is less volatile, less flammable than petrol and used as domestic central heating
fuel, (paraffin) aircraft jet fuel
Used as aircraft jet fuel
Kerosene is a very effective lighting fuel.
The chemical industry can use kerosene as a petroleum solvent or industry-grade
chemical lubricant.
It is also found in some pesticides and is particularly helpful in the elimination of
head lice.
Used as domestic purposes.
8
2 PLANT DESIGN BASIS
2.3 Climate Condition: Sylhet's climate is classified as tropical. Rainfall is significant most
months of the year, and the short dry season has little effect. The average annual temperature is
24.8 °C in Sylhet. The average annual rainfall is 3876 mm.
9
2.7 Feed (Gas Condensate) Composition and Boiling Point
Component Mole fraction Boiling point (℃ )
Propane 0.0817 -42.10200
i-Butane 0.0812 -11.73000
n-Butane 0.0807 -0.50199
i-Pentane 0.0734 27.87800
n-Pentane 0.0752 36.05900
n-Hexane 0.0749 68.73000
n-Heptane 0.0662 98.42900
n-Octane 0.0625 125.67000
n-Nonane 0.0539 150.81700
n-Decane 0.0487 174.14900
n-C11 0.0452 195.89000
n-C12 0.0450 216.27800
n-C13 0.0409 235.42900
n-C14 0.0305 253.50800
n-C15 0.0245 270.61800
n-C16 0.0206 286.79000
n-C17 0.0176 302.14900
n-C18 0.0155 316.70900
Benzene 0.0286 80.08900
Cyclopentane 0.0145 49.24800
MCyclopentane 0.0186 71.80900
2.9 Assumptions
a) The cooling water and steam will be received from Shahjalal Fertilizer
Factory Limited (SFFL) and then sent back to it for treatment after use.
10
3 PROCESS BLOCK DIAGRAM
11
4 PROCESS DESCRIPTION
4.1 Preheating
The feed (gas condensate) is pumped directly from the gas condensate storage tank by the pump
P-1104.The condensate is passed through a condensate preheat train (CPT) which is a series of
heat exchangers (two heat exchangers, all are shell and tube heat exchanger).CPT takes heat from
various process streams coming from the product of the distillation column and raise the
temperature of the condensate from ambient condition to 115⁰c. This oil is then further heated in
a furnace so that its temperature rises to 200⁰c before entering into C-1101. The product streams
from ADU (Atmospheric Distillation Unit) unit contains heat which is about 50% of the total
thermal energy required to preheat the condensate before distillation.
4.2 Fractionation
The ADU is the condensate fractionating unit which is designed for processing 4000 barrel/day
(BPD). The product from the ADU are gasoline (motor spirit), kerosene and diesel. The column
of ADU has 35 trays. Steam operated reboiler is used in this column. The type of tray used here is
sieve tray. The heated condensate from the heater H-1101 is directly fed to the 27th tray of the
distillation column C-1101. In the heater, the feed is heated to 200⁰c and so it is partially vaporized
(vapor fraction 0.8045). This partially vaporized feed is then sent to the column of Atmospheric
Distillation Unit (ADU). In fractionation column due to relative volatility of different components
of condensate it’s divided mainly in three portions. Heat transfer and mass transfer are played at
different stages and try to get equilibrium conditions.
The overhead condensate vapor is extracted at 84.18⁰c and then passed through overhead
condenser CN-1101 to exchange heat with the cooling water. After that this overhead condensed
product is sent to the fractionator reflux drum V-1101. The fractionator reflux drum V-1101
operates at 12 psig. The pressure of the reflux drum is controlled by departure of gas to the Flare
through the top. The liquid gasoline is extracted from the bottom in two ways. One goes to gasoline
storage and one goes to the distillation column top tray as reflux at 18.72⁰c at a reflux ratio of 2.
Kerosene is withdrawn from tray no.15 at 175.1⁰c.It flows by gravity into the stripper column C-
1102 consists of three trays. The light ends except kerosene are taken out from the top of the
stripper and fed back to the tray no. 14 of ADU at 188.2⁰c. The bottom product of the stripper is
kerosene at 197.5⁰c and it goes to an adjacent reboiler. The bottom portion of the reboiler is divided
into two parts. One portion goes to kerosene storage at 28.15⁰c after being heat exchanged with
the condensate feed through heat exchanger E-1101. Another portion goes back to the bottom of
the stripper at 204.4⁰c to strip away the light gasoline from the kerosene.
The diesel is taken out as the bottom product at 283.5⁰c. The diesel is then passed to a reboiler.
The bottom product from reboiler is divided into two parts. One portion goes to diesel storage at
25⁰c after being heat exchanged with the condensate feed through heat exchanger E-1102 followed
12
by a cooler AC-1101. Another portion is fed back to the bottom tray of the column at 292.7⁰c at a
boil up ratio of 0.75.
13
5 MATERIAL AND ENERGY BALANCE
HYSYS is a powerful software that was created by Hyprotech for simulation of chemical plants
and oil refineries. It includes tools for estimation of physical properties and liquid-vapor phase
equilibria, heat and material balances, and simulation of many types of chemical engineering
equipment. So we have used this simulation software to conduct the material and energy balance
of our proposed plant.
14
Table 01: Component Mole Fraction of Products
15
Table 03: Heat Duty
Energy E-100 E-101 Q1 Qcond Qreb SS1
Stream Energy
Heat Duty 2.036 × 106 2.8 × 106 5.810 × 106 1.148 × 107 5.046 × 106 1 × 106
(Btu/hr.)
16
6 UTILITY REQUIREMENT
Utility is the auxiliary component used in a industries. Continuous function of utility department
is imperative for running the plant. Utilities department helps to produce desire product more
economically. Components of utility department:
Power
Cooling water
Steam
Air
6.1 Power
The plant will need 1.5 MW of electricity daily which will be provided by Kushiara Power Plant,
Fenchuganj (50 MW).
17
7 PROCESS FLOW DIAGRAM
18
8 COST ESTIMATION
An acceptable plant design must represent a plant that can produce a product which will sell at a
profit. Initially, sufficient capital must be committed to construct all aspects of the facility
necessary for the plant. Before determining costs for any type of industrial process these costs
should be of sufficient accuracy to provide reliable decision. Capital investment is the total amount
of money needed to supply the necessary plant and manufacturing facilities plus the amount of
money required as working capital for operation of the facilities.
The capital needed to supply the required manufacturing and plant facilities is called the fixed
capital investment, while that necessary for the operation of the plant is termed the working capital.
The sum of this two capital is known as total capital investment.
8.1 Estimation of Capital Investment
Various methods can be employed for estimating capital investment. We have chosen percentage
of delivered equipment cost method depends upon the detail information available and the
accuracy desired. Estimating by percentage of delivered equipment cost is commonly used for
preliminary and study estimate. The expected accuracy is in the range of± 20 − 30% . This
method is summarized in the following cost estimation.
𝐶𝑛 = ∑( 𝐸 + 𝑓1 𝐸 + 𝑓2 𝐸 + 𝑓3 𝐸 + ⋯ + 𝑓𝑛 𝐸) = 𝐸 ∑( 1 + 𝑓1 + 𝑓2 + ⋯ + 𝑓𝑛 )
Where 𝑓1, 𝑓2, 𝑓3, … 𝑓𝑛 are multiplying factors for piping, electrical, indirect costs etc.
19
Table 05: Capital Investment Using Percentage of Delivered Equipment Cost
Direct Cost
Cost ($)
Purchased equipment 19,70,000.00
Purchased equipment installation 9,25,900.00
Instrumentation and controls 7,09,200.00
Piping 13,39,600.00
Electrical systems 2,16,700.00
Buildings 3,54,600.00
Yard improvements 1,97,000.00
Service facilities 13,79,000.00
Land 45,00,000.00
Total Direct Cost 1,15,92,000.00
Indirect Cost
Engineering and supervisions 6,50,100.00
Construction expenses 8,07,700.00
Legal expenses 78,800.00
Contractors fee 4,33,400.00
Contingency 8,66,800.00
Total Indirect Plant Cost 28,36,800.00
Fixed Capital Investment 1,44,28,800.00
Working Capital 17,53,300.00
Total Capital Investment 1,61,82,100.00
21
9 INVESTMENT ANALYSIS
Profitability is the measure of the amount of profit that can be obtained from a given situation. It
is a common denominator for all business activities.
𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 (𝒘𝒊𝒕𝒉𝒐𝒖𝒕 𝒅𝒆𝒑𝒓𝒆𝒄𝒊𝒂𝒕𝒊𝒐𝒏) = 𝑇𝑜𝑡𝑎𝑙 𝑎𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑙𝑒 − 𝑇𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡
= 8,95,72,000.00 – 8,53,65,853.00
= $ 42,06,147.00
𝑮𝒓𝒐𝒔𝒔 𝒑𝒓𝒐𝒇𝒊𝒕 (𝒘𝒊𝒕𝒉 𝒅𝒆𝒑𝒓𝒊𝒄𝒊𝒂𝒕𝒊𝒐𝒏)
= 𝑇𝑜𝑡𝑎𝑙 𝑎𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑙𝑒 − 𝑇𝑜𝑡𝑎𝑙 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 𝑐𝑜𝑠𝑡 − 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
= 8,95,72,000.00 – 8,53,65,853.00 – 16,34,715.00
= $ 25,71,432.00
𝐍𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭 = 𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 (𝑤𝑖𝑡ℎ 𝑑𝑒𝑝𝑟𝑖𝑐𝑖𝑎𝑡𝑖𝑜𝑛) × (1 − 𝐼𝑛𝑐𝑜𝑚𝑒 𝑡𝑎𝑥)
= 25,71,432.00 × ( 1 − 0.15 )
= $ 2,1,85,717.20
𝑪𝒂𝒔𝒉 𝒇𝒍𝒐𝒘 = 𝑁𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡 + 𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛
= 2,1,85,717.20 + 16,34,715.00
= $ 38,20,432.20
𝑹. 𝑶. 𝑰 = 13.51 %
22
9.2 Payout Period
It is defined as the minimum length of time theoretically necessary to recover the original capital
investment in the form of cash flow to the project based on total income minus all cost except
depreciation. Payback period is calculated [1] and discounted payback period is calculated
assuming 5% discount rate. The outcome for 30 years is given below:
Cash Flow Net Cash Flow Discounted Cash Flow Net Discounted Cash Flow
$-
Year 0 $-16,182,100.00 $-16,182,100.00 $-16,182,100.00
16,182,100.00
Year 1 $2,185,717.20 $-13,996,382.80 $2,081,635.43 $-14,100,464.57
Year 2 $2,185,717.20 $-11,810,665.60 $1,982,509.93 $-12,117,954.64
Year 3 $2,185,717.20 $-9,624,948.40 $1,888,104.70 $-10,229,849.94
Year 4 $2,185,717.20 $-7,439,231.20 $1,798,194.95 $-8,431,654.99
Year 5 $2,185,717.20 $-5,253,514.00 $1,712,566.62 $-6,719,088.37
Year 6 $2,185,717.20 $-3,067,796.80 $1,631,015.83 $-5,088,072.55
Year 7 $2,185,717.20 $-882,079.60 $1,553,348.41 $-3,534,724.14
Year 8 $2,185,717.20 $1,303,637.60 $1,479,379.44 $-2,055,344.70
Year 9 $2,185,717.20 $3,489,354.80 $1,408,932.80 $-646,411.91
Year 10 $2,185,717.20 $5,675,072.00 $1,341,840.76 $695,428.85
Year 11 $2,185,717.20 $7,860,789.20 $1,277,943.58 $1,973,372.43
Year 12 $2,185,717.20 $10,046,506.40 $1,217,089.12 $3,190,461.55
Year 13 $2,185,717.20 $12,232,223.60 $1,159,132.50 $4,349,594.05
Year 14 $2,185,717.20 $14,417,940.80 $1,103,935.71 $5,453,529.76
Year 15 $2,185,717.20 $16,603,658.00 $1,051,367.34 $6,504,897.10
Year 16 $2,185,717.20 $18,789,375.20 $1,001,302.23 $7,506,199.34
Year 17 $2,185,717.20 $20,975,092.40 $953,621.17 $8,459,820.51
Year 18 $2,185,717.20 $23,160,809.60 $908,210.64 $9,368,031.15
Year 19 $2,185,717.20 $25,346,526.80 $864,962.52 $10,232,993.67
Year 20 $2,185,717.20 $27,532,244.00 $823,773.83 $11,056,767.50
Year 21 $2,185,717.20 $29,717,961.20 $784,546.50 $11,841,314.00
Year 22 $2,185,717.20 $31,903,678.40 $747,187.14 $12,588,501.14
Year 23 $2,185,717.20 $34,089,395.60 $711,606.80 $13,300,107.94
23
Year 24 $2,185,717.20 $36,275,112.80 $677,720.76 $13,977,828.71
Year 25 $2,185,717.20 $38,460,830.00 $645,448.35 $14,623,277.05
Year 26 $2,185,717.20 $40,646,547.20 $614,712.71 $15,237,989.77
Year 27 $2,185,717.20 $42,832,264.40 $585,440.68 $15,823,430.44
Year 28 $2,185,717.20 $45,017,981.60 $557,562.55 $16,380,992.99
Year 29 $2,185,717.20 $47,203,698.80 $531,011.95 $16,912,004.95
Year 30 $2,185,717.20 $49,389,416.00 $505,725.67 $17,417,730.62
$60,000,000.00
$50,000,000.00
$40,000,000.00
AMOUNT IN DOLLAR
$30,000,000.00
$20,000,000.00
$10,000,000.00
$0.00
0 5 10 15 20 25 30 35
($10,000,000.00)
($20,000,000.00)
TIME, YEAR
24
10 SAFETY
10.1 Definition
Industrial safety in the context of occupational safety and health refers to the management of all
operations and events within an industry, for protecting its employees and assets by minimizing
hazards, risks, accidents and near misses. The relevant laws, compliance and best practices in the
industry have most of the issues addressed for the best protection possible. Employers are to make
sure that these are strictly adhered to have maximum safety.
Safety and health management is one of the vital constituents of condensate fractionation plant
industry activities because most of the operational conditions, chemicals and end products
(hydrocarbons and other compounds) associated with oil and gas production are well-known to
pose serious safety and health threats to the workers.
Falls and slips: Workers might be required to access platforms and equipment located high above
the ground, uneven surface or slippery surface which sometimes result into fall or slip hazards.
Confined space: Workers are often required to enter confined spaces such as petroleum and other
storage tanks. Workers may come into contact with chemicals which causes inhalation of toxic
chemicals, dermal or skin diseases, cancer or neoplasm, eye issues etc.
Ergonomic hazard: Workers might be exposed to ergonomics-related injury risks, such as lifting
heavy items, bending, reaching overhead, pushing and pulling heavy loads, working in awkward
body postures, and performing the same or similar tasks repetitively.
High pressure lines and equipment: Workers might be exposed to hazards from high-pressure lines.
Internal erosion of lines might result in leaks or line bursts, exposing workers to high-pressure
hazards from compressed gases or from high-pressure lines.
25
Electrical and other hazardous energy: Workers might be exposed to uncontrolled electrical,
mechanical, hydraulic, or other sources of hazardous energy if equipment is not designed, installed,
and maintained properly.
Risk identification:
Identify possible safety and health hazards within workplace through work area
inspections, previous accident or ill health records.
Risk assessment:
Identify existing precautionary measures and what went wrong.
Evaluate the risk arising from each identified hazard.
Determine what kind of injury or ill health might occur.
Rank the risks on the basis of severity
26
Risk recording:
Record the findings of risk assessment for defining control measures, audit, internal review,
regulatory purposes.
Risk control:
Define and implement preventive measures to minimize or eliminate the risk of an incident
or accident.
Follow on assessment:
Ensure that implemented control measures are being used and are effective.
Reassess the efficiency of preventive or control measures.
27
Isolate immediate hazard area and keep unauthorized personnel out. Stop spill/release if it can be
done safely. Move undamaged containers from immediate hazard area if it can be done safely.
Water spray may be useful in minimizing or dispersing vapors and to protect personnel. Cool
equipment exposed to fire with water, if it can be done safely. Avoid spreading burning liquid with
water used for cooling purposes.
28
11 PLANT LAYOUT
29
12 DISCUSSION
We have assumed the plant location near the Shahjalal Fertilizer Factory Limited (SFFL) to use
their steam and cooling water for our process. This is to reduce our plant cost.
The material and energy balance is done by using ASPEN HYSYS. In this simulation the
condensate fractionator (distillation column) is the main unit operation. The overall simulation,
plant efficiency, product composition, cost depends on the type of fractionator column used. Here
in our design, we have used a distillation column with reboiler. The column consists of 35 sieve
trays. The column can be modified by eliminating the reboiler or replacing the reboiler by steam
injection. Besides, the number of trays, feed tray, kerosene extraction tray, type of tray (bubble
cap, valve) can be changed. So the choice of distillation column, tray number, type has left a scope
of further investigation for optimizing the cost and product quality.
The total capital investment is determined on the basis of method-C (Percentage of Delivered
Equipment Cost) which is a preliminary estimate type of expected accuracy of± 20 − 30%. We
have chosen this method, because only equipment cost data was available to us. The equipment
cost is taken from different websites.
30
13 CONCLUSION
As a chemical engineer we must know the material and energy balances, thermodynamics, reaction
kinetics, mass transfer, heat transfer, plant economics, process safety and different simulation
software. “Plant Design and Sessional” course gives us a field where we can apply all the
knowledge combinedly. As a part of this course we have chosen to propose a condensate
fractionation plant as the country is going to export the extra raw gas condensate. If we export it
after fractionation then it will help to support our economy and unemployment problem. Our
proposed plant “Kushiara Condensate Fractionation Plant” is capable of producing 1.40 × 106
barrel per year. The main products are gasoline, kerosene and diesel produced at a rate of 2000,
1000 and 1000 bbl. /day consecutively. The HYSYS simulation of the process gives component
mole fraction of the products which are quite satisfactory. The plant will require a total capital
investment of $1,61,82,100.00 and return on investment is 13.51 % and payback period is 7.404
year. So it will be beneficial for the government, other national and international organizations to
invest in this proposed plant.
31
REFERENCES
Max S. Peters, Klaus D. Timmerhaus, Ronald E. West , Plant Design and Economics for
Chemical Engineers.
www.bpc.gov.bd
Perry, Robert H.; Green, Don W., Perry's Chemical Engineers' Handbook
www.chevron.com
en.wikipedia.org
32
APPENDICES
33
Appendix B -Estimation of Total Product Cost (Showing Individual Components)
I. Manufacturing cost = direct production costs + fixed charges + plant overhead costs
A. Direct production costs (about 60% of total product cost)
1. Raw materials (10-50% of total product cost)
2. Operating labor (10-20% of total product cost)
3. Direct supervisory and clerical labor (10-25% of operating labor)
4. Utilities (10-20% of total product cost)
5. Maintenance and repairs (2-10% of fixed-capital investment)
6. Operating supplies (10-20% of cost for maintenance and repairs, or 0.5-1% of fixed capital
investment)
7. Laboratory charges (10-20% of operating labor)
8. Patents and royalties (0-6% of total product cost)
C. Plant-overhead costs (50-70% of cost for operating labor, supervision, and maintenance, or 5-
15% of total product cost); includes costs for the following: general plant upkeep and overhead,
payroll overhead, packaging, medical services, safety and protection, restaurants, recreation,
salvage, laboratories, and storage facilities.
II. General expenses = administrative costs + distribution and selling costs + research and
development costs (5-15% of total product cost)
A. Administrative costs (about 15% of costs for operating labor, supervision, and maintenance,
or 2-6% of total product cost); includes costs for executive salaries, clerical wages, legal
fees, office supplies, and communication.
34
B. Distribution and selling costs (2-20% of total product cost); includes costs for sales offices,
salesmen, shipping, and advertising.
C. Research and development costs (2-5% of every sales dollar or about 5% of total product
cost).
35