Process Engineering Economics 1

Question 1

Total Capital Investment

Answer 1

TCI=Fixed Capital Investment (FCI)+Working Capital (WC)

Question 2

Fixed Capital Investment (FCI)

Answer 2

FCI=(Direct Costs)+(Indirect Costs)

Question 3

Working Capital (WC)

Answer 3

Cash, raw materials. About 10-20% of TCI

Question 4

Product Cost (C)

Answer 4

C=Ci+Cq+Co+Cg

Question 5

Fixed Charges (Ci)

Answer 5

Do not depend on production level (insurance, property tax, depreciation, rent, etc.)

Question 6

Direct Production Cost (Cq)

Answer 6

Labor, utilities, raw materials, maintenance, supplies, royalties, etc.

Question 7

Plant Overhead (Co)

Answer 7

Recreation, employee facilities, packaging, etc.

Question 8

General Expenses (Cg)

Answer 8

Administration, marketing, R&D, distribution.

Question 9

Income from sales

Answer 9

S in $/year

Question 10

Gross Earnings (R)

Answer 10

R=S-C (income from sales - product cost) in $/year

Question 11

Net Earnings (P)

Answer 11

P=R-(R-dIf)t in $/year

Net Profit)=(Gross)-(Taxes

Question 12

Depreciation Rate

Answer 12

Taxation purposes, dIf

Question 13

Design Stages

Answer 13

1. Inception
2. Preliminary evaluation of economics and market
3. Data Gathering
4. Basic Engineering & final economic evaluation
5. Detailed engineering design
6. Procurement
7. Erection
8. Start-up
9. Production

Question 14

Salvage Value

Answer 14

Net cash obtainable from the sale of used property (above charges for removal and sale)

Question 15

Scrap Value

Answer 15

Salvage value after dismantling a unit.

Question 16

Book Value

Answer 16

Present value equaling (TCI-All Depreciation)

Question 17

Market Value

Answer 17

Cash obtainable from selling the unit.

Question 18

Replacement Value

Answer 18

Cost of obtaining the same property.

Question 19

Depreciation

Answer 19

Reduction in value due to any cause.

Question 20

Types of Depreciation

Answer 20

1. Physical
2. Functional
3. Obsolescence
4. Depletion