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Tutorial 6 Problem Statement

The document presents several problems related to estimating fixed-capital investment and calculating costs for chemical processing plants. It includes methods such as the turnover-ratio and cost-capacity-exponent methods, along with calculations for break-even points, profit increases, and capital investment returns. Additionally, it discusses the impact of production capacity on total costs and the implications of fixed and variable costs in chemical production.

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Karan Agarwal
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27 views

Tutorial 6 Problem Statement

The document presents several problems related to estimating fixed-capital investment and calculating costs for chemical processing plants. It includes methods such as the turnover-ratio and cost-capacity-exponent methods, along with calculations for break-even points, profit increases, and capital investment returns. Additionally, it discusses the impact of production capacity on total costs and the implications of fixed and variable costs in chemical production.

Uploaded by

Karan Agarwal
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Tutorial 6

Problem 6.9
Estimate by the turnover-ratio
method the fixed-capital
investment required in 2000 for
a proposed sulfuric acid plant
(battery limit) which has a
capacity of 1.3 x 108 kg/yr of 100
percent sulfuric acid per year
(contact-catalytic process) using
the data from Table 6.11 when
the selling price of sulfuric acid
cost at $86 per metric ton. The
plant will operate 325 days/year.
Repeat the calculation using the
cost-capacity-exponent method
with data from Table 6.11.
Tutorial 5
Problem 6.16
A process plant making 5000 kg/day of product selling for $ 1.75 per kg has annual direct (variable)
production costs of $2 million at 100 per cent capacity and other fixed costs of $700,000.
a. What is the fixed cost per kilogram at the break-even point?
b. If the selling price of the product is increased by 10 per cent, what is the dollar increase in
net profit at full capacity if the income tax rate is 35 per cent of gross earnings?

Problem 6.17
A rough rule of thumb for the chemical industry is that $1 of annual sales requires $2 of
fixed capital investment. In a chemical processing plant where this rule applies, the total
capital investment is $2,500,000, and the working capital is 20 percent of the total capital
investment. The annual total product cost amounts to $ 1,500,000. If the income tax rates
on gross earnings total 35 percent, determine the following:
a. Percent of total capital investment returned annually as gross earnings
b. Percent of total capital investment returned annually as net profit
Tutorial 5
Problem 6.19
• A chemical processing unit has a capacity for producing 1 million kg of a product per year.
After the unit has been put into operation, it is found that only 500,000 kg of the product
can be sold per year. An analysis of the existing situation shows that all fixed and other
invariant charges, which must be paid whether or not the unit is operating, amount to 35
percent of the total product cost when operating at full capacity. Raw material costs and
other production costs that are directly proportional to the quantity of production (i.e.,
constant per kilogram of product at any production rate) amount to 40 percent of the
total product cost at full capacity. The remaining 25 percent of the total product cost is for
variable overhead and miscellaneous expenses, and the analysis indicates that these costs
are directly proportional to the production rate during operation raised to the 1.5 power.
What will be the percent change in total cost per kilogram of product if the unit is
switched from the original design rate of 106kg/yr of product to a time and rate schedule
which will produce 0.5x106 kg or "half that amount" of product per year at the least total
cost?

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