Process Economics


Cost is an important factor that stakeholders in engineering projects consider when presented with proposals. However, finding chemical, equipment, and labour pricing is not always an easy and straight forwards task. Therefore, it is essential for us to be able to come up with a valid estimation using historical data and existing formulas. In this chapter, we are going to introduce some methods to estimate the cost of building and operating plants.

Learning Objectives

By the end of this chapter, you should be able to:

Understand The elements that contribute to the capital cost for a plant

Estimate the purchased equipment price based on baseline data using the effect of capacity and time

Estimate the total capital investment (TCI) and fixed capital investment(FCI) based on the lang factor

Understand the components of manufacturing costs

Estimate the cost of operating labour

Calculate the cost of manufacturing based on a few known process costs

As you’re going through this chapter, here are some important terms for you to take note of:

  • Fixed Capital Investment (FCI)
  • Working Capital (WC)
  • Total Capital Investment (TCI)
  • Direct costs in FCI
  • Indirect costs in FCI
  • Purchased Equipment Cost
  • Marshall and Swift Equipment Cost Index
  • Chemical Engineering Plant Cost Index
  • Lang factor
  • Return on Investment (ROI)
  • Revenue
  • Cost of Manufacturing (COM)
  • Direct manufacturing costs
  • Fixed manufacturing costs
  • General expenses
  • Number of operating labour([latex]N_{OL}[/latex])
  • Cost of operating labour([latex]C_{OL}[/latex])
  • Depreciation
  • Purchased value
  • Salvage value
  • Life of equipment


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Foundations of Chemical and Biological Engineering I Copyright © 2020 by Jonathan Verrett is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License, except where otherwise noted.

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