1. OPERATING COST ESTIMATE FACTORS BUDGETS

2. OPERATING COST BUDGET SHEET BUDGET COMPONENTS –CAN BE PLACED IN CATEGORIES –BASED ON THE FORMULAS USED FOR COSTS CALCULATIONS COST CAN BE DETERMINED PER SPECIFIED UNIT OF PRODUCTION – UNIT COST

3. MODEL FOR BUDGETS CONSIDER AN AUTOMOBILE CAPITAL INVESTMENT IS THE COST FOR THE CAR ANNUAL COSTS OF AUTOMOBILE OPERATION ARE THE BASIS FOR THE BUDGET http://www.mixedpower.com/index.php

4. COST CATEGORIES FIXED COSTS REQUIRE NO DRIVING AT ALL –INSURANCE –LICENSE VARIABLE COSTS ARE BASED ON MILEAGE –GAS –OIL http://www.allaccess- insurance.com/Insuran ce_California_autos_c ars_motorcycles.jpg http://skeptically.org/site buildercontent/sitebuilde rpictures/.pond/suv- econ-gas- pump.jpg.w300h294.jpg

5. COST CATEGORIES REGULATED COSTS ARE A FUNCTION OF MILEAGE, BUT NOT NECESSARILY LINEAR –TIRES –BRAKES –OTHER NON-ROUTINE MAINTENANCE http://www.denniskirk.com/denniskirk/b2c/imag ecenter/images/street_tiremount.jpg

6. APPLICATION TO PRODUCTION FACILITIES VARIABLE - REQUIRE YIELDS FROM PROCESS DESIGN AND PRICES FROM VARIOUS SOURCES FIXED - ARE BASED ON VARIOUS OTHER COMPONENTS CAPITAL BASED COMPONENTS - MAINTENANCE, INSURANCE & TAXES, FACTORY EXPENSE, DEPRECIATION LABOR BASED - LABORATORY SALES BASED - RESEARCH (USING ANNUAL PROJECTED REVENUES) REGULATED - BASED ON ACTUAL NUMBER OF LABOR UNITS REQUIRED.

7. COST SHEET VALUES FOR AN OPERATING BUDGET ARE PRESENTED ON SOME ORGANIZATIONS CALL A COST SHEET COSTS ARE ENTERED ACCORDING TO THE TYPE OF COMPONENT –THE COSTS ARE PRESENTED IN A FORMAT THAT ALLOWS DETERMINATION OF THE IMPACT OF EACH COMPONENT ON THE TOTAL COST –TYPICAL BASES ARE COST PER MASS UNIT –THE MASS UNITS MAY BE VERY LARGE FOR HIGH VOLUME PRODUCTS –MASS UNITS FOR PHARMACEUTICALS ARE TYPICALLY PER GRAM OR SMALLER

8. BUDGET SHEETS FOR PROJECTS

10. BUDGET SHEETS IN ECONOMIC ANALYSES UNIT COSTS ARE USED TO CALCULATE THE C.O.M. COLUMN FOR THE CASH FLOW ANALYSES ALL VALUES ARE CONVERTED TO A UNIT PRICE TO GET THE TOTAL C.O.M., BUT THIS MUST BE ADJUSTED IF THE PRODUCTION RATE IS CHANGED. DEPRECIATION REMAINS IN THE C.O.M. COLUMN UNLESS IT HAS A SEPARATE COLUMN FOR ENTRY (BASED ON THE SCHEDULE USED FOR THE ANALYSIS)

11. BUDGETS ARE PRODUCED ANNUALLY THESE ARE USED TO PREDICT THE PROFITABILITY OF THE COMPANY SUPERVISOR’S ALSO USE THEM TO ASSESS THE PERFORMANCE OF THE PLANT

12. CALCULATION OF COSTS FOR THE PROJECT VARIABLE COSTS DATA SHOULD COME FROM SIMULATION –RAW MATERIALS CONSUMPTION DEPENDS ON YIELDS PRICES FROM CHEM. MKTG. RPTR. –UTILITY COSTS DEPEND ON EFFICIENCIES DATA IN MEMO SPECIFIES VALUES IF MORE CURRENT DATA ARE NOT AVAILABLE. http://www.energy.ca.gov/electricity/FOR CURRENT DATAhttp://www.energy.ca.gov/electricity/

13. REGULATED COSTS OPERATING LABOR –DETERMINE NUMBER OF OPERATORS –HOURLY COST = $25/HR OR GO TO http://www.bls.gov/ FOR CURRENT VALUES http://www.bls.gov/ –ACTUAL PAY SHOULD INCLUDE TRAINING AND OVERTIME (10%) –OVERHEAD MULTIPLIER = 35% ON BASE http://www.power- technology.com/projects/avedore/im ages/avedore5.jpg

14. REGULATED COSTS SUPERVISION FOREMAN – ONE TO THREE, DEPENDING ON COMPLEXITY OF PROCESS –SALARY = $60K/YR –OVERHEAD = 35% SUPERVISOR –1 PER PLANT –ASSUME ANNUAL SALARY = $65K/YR –OVERHEAD = 35% http://www.arvon.com/foreman.JPG http://www.time- scan.com/jansen- images/home_B2-foreman.jpg

15. REGULATED COSTS MAINTENANCE –DETERMINE NUMBER FROM FUNCTION - BUT NO MORE THAN 2 PER PLANT EQUIVALENT FULL TIME –HOURLY COST = $28/HR –ACTUAL PAY SHOULD INCLUDE TRAINING AND OVERTIME (10%) –OVERHEAD MULTIPLIER = 35% ON BASE https://www.getransportation.com/gene ral/global_signaling/services/images/m aintenance.jpg

16. MAINTENANCE SUPERVISION ONE MAINTENANCE FOREMAN PER 10 MAINTENANCE PERSONNEL –SALARY = $60K/YR –OVERHEAD = 35% MAINTENANCE SUPERVISOR –1 PER 4 MAINTENANCE FOREMAN –ASSUME ANNUAL SALARY = $65K/YR –OVERHEAD = 35%

17. REGULATED COSTS NON-OPERATION/MAINTENANCE OVERHEAD –INCLUDES ALL ADMINISTRATIVE FUNCTIONS –ASSUME 18% OF BASE OPERATING SALARIES (WHICH INCLUDES OVERHEADS) ENGINEERING –ASSUME 2 EQUIVALENT FULL-TIME ENGINEERS PER PLANT –ANNUAL SALARY = $60K –OVERHEAD (INCLUDING SUPERVISION) = 50% LAB COSTS –ASSUME 1 EQUIVALENT FULL-TIME CHEMIST PER PROCESS –ANNUAL SALARY = $50K/YEAR –OVERHEAD (INCLUDING SUPERVISION) = 50%

18. CAPITAL BASED OPERATING COMPONENTS (EXCLUDING CUSTOM SPARES) MAINTENANCE PARTS SHOULD RUN BETWEEN 3 - 5% OF DFC PER YEAR (EXCLUDING MAINTENANCE LABOR) INSURANCE AND TAXES SHOULD BE ~ 3% DFC PER YEAR http://www.rad- ra.com/images/robotic_accessories_main tenance_service_spare_parts_warehouse.jpg

19. CORPORATE FACTORS SET BY EACH COMPANY –RESEARCH - 5% DFC –SALES - 7% OF SALES GENERAL AND ADMINISTRATION - 2% DFC/YEAR http://www.ion.ucl.ac.uk/images/Rese arch-Lab.jpg

20. USE OF BUDGET FOR CALCULATIONS BREAK EVEN CALCULATION COSTS CAN BE PLOTTED TO DETERMINE THE MINIMUM REQUIRED OPERATING LEVEL BREAK-EVEN POINT IS WHERE TOTAL REVENUES = TOTAL COM –ABOVE THIS LEVEL, THERE IS A PROFIT –BELOW THIS LEVEL THERE IS A LOSS SHUT DOWN POINT IS WHERE LOSSES = FIXED COSTS

21. TYPICAL BREAK-EVEN ANALYSIS GRAPH

22. BREAK-EVEN ANALYSIS CAN INCLUDE COST ADJUSTMENTS AS A FUNCTION OF PRODUCTION RATES IS BASED ON AN ANNUAL INTEGRATED PRODUCTION, SO REMOVES SEASONAL VARIATIONS http://content.answers.com/main/content/i mg/barrons/accounting/images/1-A2.jpg http://www.dwmbeancounter.com/chart.gif

23. EXAMPLE FOR ADIPIC ACID From Tony Pavone Comparison of two cases