JAMES B. WEAVER Economic Evaluation Department, Atlas Powder
Co., Wilmington 99, Del.
Profitab
T H E YEAR, 1957, might be described as maintaining a dynamic status quo in the specialty of economic evaluation. Three series of bibliographies in the field were extended (70L, 76L, 44L). T h e two recently formed organizations in the field, the American Association of Cost Engineers and thz Engineering Economy Division of the American Society for Engineering Education, completed their first year and continued to travel very different paths toward the same general goals. During the year, four reports made it clear that computers would soon be saving time and energy for evaluators ( 7 0 , 73E, QL, 78L). Regular series of cost articles continued in the Oil @ Gas Journal (30B, 37B, 33C3 5 c , 38F-40F) and in INDUSTRIAL AND ENGINEERING CHEMISTRY (79F-28F). An index of Nelson’s work has appeared (29L). Symposia on estimating also continued a t the American Institute of Chemical Engineers meetings (22C, 23C, 47C). Articles of critical significance to the estimator continued to appear in such diverse outlets as the Journal of Business of the University of Chicago (2E, 32E, 7 7J ) , The Controller (76E, 76H, 79H, 4 L ) , the series of McGraw-Hill
Consultants Reports (3C, 70J, 34L), Rand Corp. Reports (IQE),and Exblorations in Entrebreneurial History (35L). As this routine reading load increased, other significant contributions were hidden away in an unpublished thesis ( 3 6 E ) , in unpublished manuscripts circulated by the author (44E, 4 4 , or in the speaker’s note cards with only a hint of the content permanently recorded (7QD, 48E, 2L, 75z, 20L). Two organizations in the field show real promise of becoming a tribute to those working in this area. The Engineering Economy Division of the ASEE, a group of university educators concerned with engineering economics, held a modest meeting (30C, 40C) and published a fine but unpretentious journal reflecting the philosophy of the division. Its format has always been secondary to content, staking future growth on solidly established accomplishments. T h e American Association of Cost Engineers held a meeting (9A, 74B, 27B, 20C, 6D, SD, 740, 72L), expanded to over 500 members, and formed some 20 committees to start working on a variety of important aspects. Generally they gave the impression that their unbounded
enthusiasm and aggressiveness will continue to attract members on the prospect of future accomplishments. RegionaI sections already exist in five or six areas (77L) with interesting subjects under discussion (70, 79D, 2L, 8L, 75L,20L, 28L). However, the publication record of the association is so far very poor with only three of the presentations reaching the publication stage (74B, 20C, 8 L ) . I t is unfortunate that the 1958 meetings of the two organizations will conflict (June
16-18). Equipment-Unit Auxiliary
Operations and
Correlated fixed investment data on basic unit operations were few and far between during the year (Section A), Data on auxiliaries (Section B) fared somewhat better. Clark’s presentation to AACE on piping (74B), Katell’s comments on water cooling and air compression (ZZB, 23B), Kiernan’s data on buildings (25B), and Warren’s article on instruments (38B) can be helpful. However, this last item is an example of an increasing tendency in recent years to publish uncorrelated tabulations (72A, VOL. 50, NO. 5
MAY 1958
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22A, 23A) of individual pieces of equipment. Such a presentation leaves much to be desired for estimating purposes. Also, 1957 may mark the first use in an advertisement of correlated investment data ( 5 4 This graphical correlation, based on an item in a catalog (75A), would seem to be a useful means of selling equipment. An unpublished presentation to AACE on tanks, vessels, and heat exchangers (9A) showed promise of being a real contribution. Heat exchanger costs were also covered by Rubin (76A). I
Manufacturing Coot Section C of the bibliography covers items concerned with manufacturing cost and sales revenue, labor, employee benefits, maintenance, packaging, transportation and freight, depreciation, overheads, taxes, and pricing. An AIChE symposium on operating labor cost has been published as a series (22C, 23C, 47C). Pierce (36C) cites data on 10 plants where maintenance ranges from 5.7 to 15.370 of investment. A new “Maintenance Engineering Handbook‘’ (29C) indicates a maintenance range from 3% to 15% of manufacturing costs. Allen ( I C ) studies the proper distribution of national and divisional overheads. Although two good discussions appeared about factors to be considered in freight and distribution of products (7C, 21C), the literature still lacks any concerted attempt to correlate freight costs for estimating purposes on the basis of distance shipped. Several thoughtful analyses on depreciation (ZC, 2OC, 38C) were included which assist in understanding the real effect on profitability of the choice of depreciation method. Davis (73C) presents a nomograph for calculating the annual depreciation allowance under the sum of the years’-digits method; a threeyear minimum applying to the method is apparently ignored. Taxes and pricing may not generally be considered in the province of the estimator, but both have a major effect on profitability. Jelen (25C) and Weaver (4OC) state that taxes must be considered, as they affect different projects in different manners; the latter also discusses the major effect of taxes payable in decreasing required working capital. Criteria for establishing intracompany (72C) and customer pricing are cited (3C, 27C).
Estimating TechniquesManufacturing Cost and Investment Section D covers improvement of methods in these areas. As usual, adequate presentations were made of investment (70), manufacturing cost es-
754
timating (60),and combinations of both (50). Dickerson discussed the problem of fixed investment estimating a t various sizes by use of the approximate “sixtenths factor” including some specific higher and lower factors for use with several types of equipment (30). A table of factors for use with the six-tenths rule was presented by Nelson (700). The table is convenient to use but would have better indicated the possible accuracy of such a calculation if seven-tenths and eight-tenths factors had been included. Unfortunately, a n error has been carried over from the 1948 edition of this series. (Multiplier factor should be 1.17 for size ratio of 1.3). The circular slide rule discussed under inflation indexes also provides for scale-up by the six-tenths factor ( I H ) . The major advance published during the year is the report by Adams and others ( 7 0 ) on the use of computers in economic evaluation of research projects. For various input assumptions such as yield, the computer is used to estimate the selling price needed to return various percentages of investment. Very little has been published in Great Britain on cost estimation. A series by Stallworthy (150) gives indications of filling in some of the gaps if continued. The value of each article has increased since an inauspicious start. The December article contains a good discussion of the possible range of equipment cost for one item from different vendors. Some graphs of equipment data are included. A presentation by Timpe (761))a t the December meeting of the AIChE was published. He proposed to discuss the economic advantages of designing for a capacity in excess of sales requirements while leaving equipment idle part of the time. The case ‘‘for” is not proved in the text, and other errors occur since depreciation is not considered as a cash regeneration. Eubank and White (40)published an example of the use of Monte Carlo technique in engineering economics. Masse and Gibrat (80) show the use of linear programming in a n investment decision problem. Miller (9D)proposes action to develop standard definitions and methods within the cost estimating field. Norden and Verink ( 7 7 0 ) use capitalized cost considerations to choose materials of construction. A group of 1956 articles on fixed investment estimating has been reprinted (720).
Profitability and Replacement Estimating Techniques
A considerable difference of opinion exists as to the best methods for estimating profitability (Section E). Bates and
INDUSTRIAL AND ENGINEERING CHEMISTRY
LVeaver ( 7 E ) have attempted to compare the various methods used for capital expenditure justification (except for replacement). The methods are compared on the basis of their consideration of investment, profits, time value of money, and other factors. il’hile admitting a preference for some of the methods, their attempt a t objective presentation mav assist in a choice of method. Jelen (25C) proposes a method for extending the use of capitalized costs beyond replacement alone to consider the profitability of an entire capital venture. The concept of perpetual replacement seems to be a logical approach to strictly replacement decisions. Variety of possible income patterns and service lives raises some question as to its propriety in comparing investment alternatives. A survey has been published (24E) and reviewed ( B E ) outlining the present utilization of methods for profitability analysis. Most respondents to the survey apparently use the simpler methods. Depreciation policies of respondents are also discussed. One third of the respondents use each of the accepted methods. Orensteen (29E) has published a further simplification of the Machinery and Allied Products Institute (MAPI) replacement technique. Davidson (77E) discusses the shortcomings of the technique as an analytic model because of certain of its arbitrary simplifying assumptions. A new hook on Operations Research (70E) discusses replacement models. Boivman and Fetter (3E) also approach replacement from a mathematical point of view and derive a n investment model which has ‘much to recommend it. A later publication by Fetter and Goodman (73E) uses this model on an analog computer to study the major variables of investment evaluation. Graphical cost relationships based on the computer runs are presented. If the technique can be extended to consider taxes and working capital, it will be of immediate and major usefulness. Their investment model is based on the present worth technique. Various other presentations discuss this general method (?7E, 79E, 37E, 44E). Others discuss interest rate of return (16E, 37E, 33E35E, 38E). Comparisons of the two are also made (2.73, 32E, 48.73). These two methods seem to have the most to recommend them. A thesis by Rogers (36E) makes an interesting case-study comparison of a n investment and a replacement problem by 23 variations of four general profitability methods (annual cost, present worth, payout time, and rate of return). I t is a real contribution but lacks summaries and a conclusion.
A second edition of Thuesen’s “Engineering Economy” has been published (46E) and reviewed (75E). The major addition from the old edition, a complete chapter on taxes, dwells in detail on the forms and procedures necessary for individual and corporate filing of income tax. The chapter seems to omit the effect of taxes on engineering economy decisions (26C, 4OC). Shillinglaw (43E) discusses the analyses required for abandonment decisions, based on cash return rather than return on book investment. The method involves an incremental analysis of the present worth of the income which is lost, compared with achievable salvage value. Niland ( B E ) discusses the special problems of profitability analysis in singlepurpose and short-lived equipment. A graphical short-cut has been published for determining interest rate of return (annual compounding) on fixed investment only ( 9 E ) . This short-cut uses a 50% tax rate. This approximation is sometimes justified for simplicity in individual calculations. I t would seem advisable to consider the present 52% tax when presenting generalized relationships of this sort. Shanaman (42E) reviewed return on investment and working capital considerations in the agricultural chemicals industry (chiefly pesticide formulators) compared with those for the average chemical company. The contents have been summarized (7E, SE, 2OE) but the specialized information is worth complete publication. All these discussions concern capital expenditure evaluation before investment, by return on investment techniques. The Du Pont system of return on original investment has again been described (47E). A convenient bibliography has appeared of return on investment and cost accounting literature (25E); the bibliography completely omits methods considering the time value of money. Other presentations (423, 78E, 45E) are also based on return on investment. A system used by W. R. Grace for profitability evaluation has been described (5E, 27E). The system uses a weighted check list which does not consider return on investment heavily. Sandel (39E) and Reul (33E-35E) raise the problem of allocation of investment in existing facilities which are to be used in a proposed investment project. They recommend that a fair-share allocation should be considered in such evaluations, probably a t replacement value (although original value and book value are also sometimes used in this connection). The general principle violates the “sunk cost” theory of engineering economics (46E).
A further utilization of this allocation principle is the extension of the returnon-investment concept for use as a basis for pricing (27C) or for judging divisional performance within a company (72E, 4QE). When return on investment is used to assist decisions in these two areas, the subject investment is entirely a “sunk cost.” Engineering economists therefore consider it a n improper basis for decision. Bergfeld and others (3C) support this point of view. They maintain that optimum pricing and performance on existing facilities results from maximation of total dollar income from the product which contributes to profit and overhead.
Product Cost Estimates Again Section F covers a variety of published cost data for individual products from frozen foods (78F), aerosols (47F), and soap (7QF) to ursolic acid from the extraction of cranberry skins ( 2 F ) and snake-cage polyelectrolytes (29F). Most of the data should be subjected to searching question before they are used for decision making. A case in point is the second edition of Faith, Keyes, and Clark (76F). This handbook contains cost data which do not seem reliable based on a comparison with their own 1950 edition. All publication references have been omitted. Many of their sources may have been news items. Such announced costs lack details of coverage and are usually not suitable for cost ‘estimation. Others disagree with this and have published cost correlations from news-item data (38F-4OF, 75G).
Inflation Indexes Listed in Section H are regularly and irregularly published indexes now available. A British index of chemical construction costs has been compiled (4H). Projection of inflation into cost and profitability analysis is suggested (27E). A correlation can be used to compare increases (78H). Royce (76H) believes no “index of general machinery price trends” is worth keeping because of the wide variation of price increases. He also discusses the problem of improved, technological quality in products which make a comparable price index hard to maintain. Several authors discuss the effect of inflation on company balance sheets. Spacek (7QH) believes accounting reports have contributed to inflation by overstating profits and creating a false sense of prosperity. H e blames this inpart on “lack of courage” of the accounting profession. H e suggests that the increase in equipment value between an
original purchase and its replacement should be taxed only a t the capital gains rate to reflect inflation, as would resale of land held over the same period. Based on the “Cost-imating” series by W. L. Nelson, the Chemical Construction Corp. has issued a convenient circular slide rule ( 7 H ) which will update costs of certain types of equipment purchased in the past to an estimate of 1957 replacement value. Scale-up of fixed investment by the six-tenths factor is also possible with the slide rule.
Capital Budgeting
No system based on return on investment is applicable until some knowledge exists of the minimum rate of return on investment acceptable to the company. Section J covers discussions of this aspect of the profitability problem, aIong with sources of capital and working capital. I t is clear from the literature that methods are still lacking for a quantitative determination of either the minimum acceptable rate of return or the “cost of capital,” or of determining which to use if they are different. A convenient summary of procedures in obtaining additional capital from various sources is contained in,Leness and others (703). Working capital, badly in need of critical analysis and additional estimating methods, was hardly discussed at all during the year (40C). Research Evaluation Section K covers procedures for planning and evaluation of research and development projects. Watson (QK) points out the time value of omitting the pilot plant step completely between research and a commercial plant if adequate research data can be obtained for a complete scale-up. His discussion incorporates a development of profitability estimation techniques for use in research justification.
* Miscellaneous Section L is the catch-all which this year covers items on leasing us. buying equipment (24L, 46L) ; making us. buying ingredients (34L,40L); economic lot size for purchase or manufacture ( I L , 27L, 42L); inventory control (7L, 22L, 47L, 45L) ; corrosion economics (6L, 77L, 79L, 33L, 3 Q L ) ; accounting for byproducts (27L, 37L); and the development of “cost engineering” (8L, 77L, 72L, 75L, 30L). Plant location considerations of current natural gas economics VOL. 50, NO. 5
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are covered by Brooks (3L). Buzzi (4L) describes a financial organization for a company, including the evaluation function. Many pre-1957 items of cost data are listed in Cushing (73L). Nitchie (32L) describes development of a standard cost system. Redlich (35L) pursues a theory of risk.
The word “manufacture” after a product name indicates both fixed and operating costs are included. Abandonment of projects (43E). Absorbers (78A). See also Towers, fractionating. Accounting (75E, 25E, 46E, 25L, 32L, 38Lj. See also By-products; Depreciation; Taxes. Acetaldehyde, fixed investment ( 76F). Acetic acid, fixed investment (76F). Acetic anhydride manufacture (25F). Acetylene Fixed investment (76F). Manufacture ( 7 2 0 ) . Acrylonitrile, fixed investment (76F). Administrative expense (33B, 7C, 46E). Aerosol packaging (4727). Agitators (7Aj. Agglomeratprs. See Precipitators. Air conditioning (77B, 8H). Alkylamines, fixed investment ( 7 6 F ) . Alkylaryl sulfonate, fixed investment ( 76F). Alkylation Fixed investment (38F, 75G). Manufacture (27G, 23G, 24G). Allocation of existing facilities (33E-35E, 3QE). Alternatives (46E). Aluminum chloride, fixed investment (76F). Aluminum sulfate, fixed investment ( 16F). Ammonia, fixed investment (76F, 3 8 F ) . Ammonium nitrate Fixed investment ( 7 6 F ) . Manufacture (42F). Ammonium phosphate manufacture (3F). Ammonium sulfate Fixed investment (76F). Manufacture (ZOF). Amortization. See Depreciation. Aniline, fixed investment (76F). Annual cost (3E, 36E, 40E, 46E). Asphalt, inveshent (38F). Autoclaves. See Vessels. Balance Sheets (4623). Barging (7C, 8C,3QC). Barium carbonate, fixed investment ( 7 6 F ) . Batch operations ( 7 6 0 ) . Benzaldehyde, fixed investment (76F). Benzene, fixed investment (75G). Benzene hexachloride, fixed investment (76F). Bibliographies (6K,IOL, 73L, 76L, 22L, 44L). Blowers (720). See also Fans. Bond model (46E). Break-even charts ( 7 7 0 , 46E). Briquetting machines (4A).
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Acknowledgment T h e considerabIe reviewing load represented here was shared during 1957 by A. G. Bates, F. S. Lyndall, F. L. MacArtor, H. A. Quigley, R. J. Reilly, and J. S. Rhodes. Their abstracts have assisted immeasurably and are quoted frequently herein. ,
Budgeting. See Capital budgeting, Buildings (72B, 25B, 750). Butadiene, fixed investment (76F, 38F). Butyl alcohol, fixed investment (76F). Butyraldehyde, fixed investment (76F). By-products, cost allocation (27L, 37L). Calcium carbide furnace (76F). Calcium phosphate, fixed investment (76F). Capital Cost (ZE, 7QE,38E, l J , 4 J , SJ-SJ, 77J, 72J).
Sources (14E, 46E, 5J, 7UJ). Working ( I D , 7E, 394 3J, QJ, 7L). See also, Inventory Capital budgeting, profitability (ZE, 78E, 27E, 44E). Capitalized costs (26C, 770, 36E, 46E). Carbon black, fixed investment (76F, 38F). Carbon dioxide, fixed investment (76F, 38F). Carbon disulfide, fixed investment (76F). Carbon monoxide manufacture (77F). Carbon tetrachloride Fixed investment ( 7 6 F ) . Manufacture (27F). Carbonization of fluidized coal (37F). Carboxymethyl cellulose, fixed investment (76F). Cash forecasts ( 2 J ) . Catalysts (34F, 45F). Cathodic protection (33L). Chloral, fixed investmept (76F). Chlorine Fixed investment (5F, 76F, 48F). Manufacture (12F, 26F). Chlorine dioxide manufacture (8F). Citric acid, fixed investment (76F). Coke and coal gas, fixed investment (76F). Columns. See Towers, fractionating. Comparison of competing processes ( 7 4 0 ) . Compressed air (7QB,23B). Compressors (23A, 34B, 720). Computer Investment cost and rental (7B). Use in estimating ( 7 D , 73E, QL, 78L). Containers. See Packaging. Contractor’s fee (33B). Control systems, pneumatic (35B, 36B). Conveyors (77A, 7ZA). Coolers. See Heat exchangers; Refrigeration. Corrosion protection (6L, 77L, 7QL, 33L, 3QL). cost Control (32L). Engineering (8L, 77L, 72L, 7 5 4 30L). Fixed us. variable (25E, 46E, 32L, 38L). Records for estimating (720). Standard (25E, 32L, 38L). Sunk (75E, 46E).
INDUSTRIAL AND ENGINEERING CHEMISTRY
Cottonseed fiItration-extraction (75F). Cranberry skin extraction (28). Cresol, fixed investment (76F). Cumene, fixed investment (38F). Cyclones (77A). Data processing e uipment (IOB, 378, 2L). Decarbonization 720). Decision criteria and processes (47L). Depreciation (ZC, 4C, 77C, 73C-76C, 79C, ZOC, 25C, ZSC, 30C, 38C, 5D, 720, 24E, 26E, 46E, 6H, 8H, 7QH). Desalting crude oil (75G). Desulfurization, catalytic (38F, 75G, 27G). Dewaxing crude oil Fixed investment (38F, 75G, 78G,27G, ZGG). Operating costs (26G). Dialkyl phthalates, fixed investment (76F). Dichlorophenoxyacetic acid (27F). Dimethyl phthalates, fixed investment (76F). Diphenylamine, fixed investment (76F). Distillation equipment, See Towers, fractionating. Diversification (5E). Dry Ice. See Carbon dioxide. Dryers (720). Spray (744). Vacuum ( 7 2 0 ) . Ducts ( 7 B ) . Dust collectors ( 6 A , 77A). See also Filters, gas; Precipitators; Scrubbers.
9
Economic balance (QLj. Economic buying size (27L). Economic lot size (75E, 46E, 7L, 4ZL). Electricity. See Power. Employee benefits (78C, 37C, 3ZC). Engineering, design ( S H , 73L). Engineering economy (ZE, 15E, 26E, 46E, 74L, 26L). Engineer’s responsibility for costs (730, 8L, 36L ) Estimation functions, general (ZOL, ZRL). I
Fixed investment only ( 7 0 , 7 Manufacturing cost only ( 6 D ) . Ethane recovery, fixed investment (38F, 2ZG).
Ethanol. See Ethyl alcohol. Ether, fixed investment ( 7 6 F ) . Ethyl alcohol, fixed investment ( 7 6 F ) . Ethyl chloride, fixed investment ( 76F). Ethblene Fixed investment (76F, 38F, 40F). Manufacture (36F). Ethylene dichloride, fixed investment ( 76F). Ethylene glycol, fixed investment (76F). Ethylene oxide, fixed investment (76F). Evaporators (IOA, 720). Excavation (25B). Exhausters. See Fans. Extraction (7QA). Fabrication (33B). Fans (7B, 720). Fatty alcohol manufacture ( 7 F ) . Feeders, solids (7A). See also Conveyors. Ferrous sulfate, fixed investment (76F). Fertilizer Granulated, manufacture (30F). Nongranulated (30F). Liquid (4QF). Filters Gas and air (77A). Liquid (23A, 720). Financial organization (4L).
Financing. See Capital, sources of. Fitting, pipe (78A, 33B). Fixed capital. See Estimation methods. Flanges. See Fitting, pipe. Flashin , vacuum (75G). Floors t25B). Food freezing, canning, dehydrating ( 78F). Forecasting (770). Formaldehyde Fixed investment (76F). Manufacture (4F). Formic acid Fixed investment ( 76F). Manufacture (24F). Foundations (25B. . . 33B). Freight Chemical; (6C-9C, 21C, 34C, 39C). Equipment ( 2 0 ) . Furfural, fixed investment ( 76F). Game theory (43L). Gas, natural,. liquefied (70F). Glycerine Fixed investment (76F). Purification (43F). Graphical methods ( 720, 33E-35E). Heat exchangers (5A, 9A, 75A, 76A, 78A, ZOA, 7 7 0 , 720, 75D). Hexamethylenetetramine, fixed investment (76F). ' Hexamine manufacture (7F). Highways (8H). Hydrochloric acid investment ( 76F). Hydrofluoric acid, fixed investment ( 76F). Hydrogen Fixed investment (76F, 38F). Manufacture ( I F , 77F).
P
Incremental approach (3QE). Inflation (77C, 74C, 15C, 6H, 76H, 79H27H). Inflation indexes Construction (4H, 8H, 7011, 77H, 78H). Equipment ( I H , 2H, 5H,, lOH, 74H, 75H. 78H1. Fuel (74H): General (33C, 3QE, 7H, 3H, 5H, 8H, 14H, 76H). Labor ( I H , 3H, 7H, 70H, 74H, 78H). Maintenance (9H). Material (3H, 7H, 70H, 72H, 73H). Power (74H). Prices (77H, 18H). Ingredients, make-or-buy (46E, 34L, 40L). Installation costs (33B, 46E). Instrument board (38B). Instrumentation (47E). Chromatography (6B, 9B). Flow recorders, controllers (35B, 38B). Infrared analyzers (6B, 8B). Level indicator (35B, 38B). Potentiometers (38B). Pressure gages and controller (35B, 38B). Thermometers, recording, controlling (35B, 38B). Insulation for heat (2B. 33B). Interest, compound (3E, 73E, 46E). Interest rate of return on investment (7E, 76E, 37E, 33E-36E). See also Return on investment; Profitability. Inventory (7L, 22L, 47~5,45L). Investment models (3E, 7 7E, 73E). Investment other than equipment (usually % breakdown) ( 7 2 0 ) . See also Estimation methods. Investor's method. See Interest rate of return on investment. Iron ore conversion (44F). Isomerization (IG, 72G, 27G). Isophthalic acid, fixed investment (76F).
Isopropyl alcohol, fixed investment ( 76F). Kettles. See Vessels. Kilns. See Dryers. Labor, operating (77C, 22C, 23C, 47C, 46E). Labor rates (33B, 33C, 35C, 79G, 8H). Lactic acid, fixed investment (76F). Ladders (22A). Leasing (28C, 24L, 46L). Lime. fixed investment ( 76F). Linear programming (8D,27E, 5L). Linings, vessel or tower ( 1 5 0 ) . Liquefaction of natural gas (77G, 28G). Maintenance (29C, 36C, 37C, 42C, 46E). Make us. buy. See Ingredients. Maleic anhydride, fixed investment (76F). Manufacturing cost estimates. See Estimation methods. MAPI replacement analysis (3E, 77E, 75E, 24E, 29E, 36E, 46E). Market analysis (48E). Materials Chemical. See Ingredients. Fabrication and construction (6L). Materials handling (24C). Mercaptan removal (7OG). Meters. See Instrumentation. Methanol, fixed investment (76F, 38F). Methyl alcohol. See Methanol. Methvl chloride. fixed investment (76F). Methil esters from herring oil (5bF). ' Mixing, solids (2A). Molecular sieves (2QG). Monosodium glutamate, fixed investment (76F). Monte Carlo technique ( 4 0 ) . I
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Naphthalene (76F). &Naphthol, fixed investment ( 76F). Nitric acid, fixed investment (76F, 38F). Nitrogen removal from natural gas (4G). Nitroparaffins, fixed investment (76F). Nomographs (19B, 73C). Obsolescence. See Depreciation. Octane improvement (7G, 8G,9G, 29G). Operations research (7OE, 7K). See also Linear programming; Game theory; Monte Carlo technique. Out-of-pocket estimating method. See Incremental approach. Overhead, operating (338, 1C). Oxygen Investment (76F, 38F). Manufacture (32F). Packaging (24C). Payout time (payoff period) (29B, 5D, 720, 760, 7E, 3E, 74E, 22E, 24E, 36E, 46'E). Pentigrythritol, fixed investment (16F). Pesticides profitability (7E, 8E, 20E, 42E). Phenol Fixed investment (76F, 38F). Manufacture (22F). PhosDhoric acid Fi2ed investment only (SF, 76F). Manufacture (3F). Phosphorus, fixed investment (16F). Phthalic anhydride, fixed investment ( 76F). Pilot plant economics ( Q K ) . Pipelines, cross-country (21B). Piping, process and utility (79A, 74B, 27B, 33B, 720). Plant location (46E, 3L). Platforming, fixed investment (76F). Polyethylene, fixed investment (76F, 38F) .?OR1
Poiime&zation, catalytic ( 720, 75G). Potassium borohydride manufacture ( 77F). Potassium chlorate, fixed investment (76F). Potassium chloride, fixed investment (76P). Power costs (37B, 46E).
Precipitators, electrical, dust and mist ( 7 7 A ) . See also Dust collectors; Scrubbers; Filters, gas. Present worth determination (7E-3E, 73E, 77E, 79E, 32E, 36E, 37E, 44E, 46E). See also Profitability; Return on investment. Pricing (3C, 79C, 27C, 46E). Intracompany (72C, 37L). Profit. reinvestment of (2E). Profitability index. &e Interest rate of return. Profitability techniques (see Section E ) ( 7 2 0 ) . See also Present worth; Return on investment. Programming. See Linear programming. Pulverizers. See Size reduction equipment. Pumping (28B). Pumping stations (29B). Pumps, liquid (78A, 26B, 720, 750). Radiation processing of petroleum (5G). Radioisotopes in refining (3G). Refining (2G, 73G, 75G-77G, 79G, ZOG, 27G). Reforming Catalytic (5G, 75G, 27G). Fixed ,investment (720, 16F, 14G). Refrigeration (75B). Rental, equipment (33C). Replacement (3E, IOE, 77E, 76E, 24E, 2QE. 30E. 40E, 46E). See also MAPI replacement analysis. Research evaluation (see Section K ) (5E, 7K-9K). Research, outside expense (23L). Return on investment (33B, ZC, 5D, 120, 7E, 4E, 9E, 72E, 78E, 22E, 23E, 47E, 45E, 46E, 49E). See also Profitability; Interest rate of return. Return on sales ( 2 0 ) . Risk comparison ( 7 8 0 , 3E, 14E, 77E, 27E, 28E, 46E, 48E, IK, 35L). Roofs (25B). Sales expense (IC). Salicylic acid Fixed investment (76F). Manufacture (23F). Salvage value (73E, 29E, 43E). Scrubbers (3.4, 8A). See also Dust collectors; Fifters, air. Seasonal demand (46E). Separators. See C clones; Thickeners. Service life, useful [3E, 38E). Settlers. See Thickeners. Settling equipment. See Thickeners. Shale oil, fixed investment (38F). Six-tenths factor. See Size factor. Size factor us. cost ( 3 0 , 700, 75D, 73G, 7H). Size reduction equipment (73A). Snake cage polyelectrolytes (29F). Soap manufa$ure (79F). Sodium, fixed investment (76F). Sodium carbonate, fixed investment (76F). Sodium chlorate, fixed investment ( 76F). Sodium chloride Fixed investment (76F). Manufacture (28F). Sodium cyanide manufacture (46F, 47F). Sodium hydroxide Fixed investment (76F, 48F). Manufacture (26F). Sodium silicate, fixed investment (76F). Specialized equipment (28E). Spray dryers. See Dryers, spray. Standardization of cost data, of forms (QD). Steam ( 7 5 0 ) . Storage, petroleum products, undergroun4 (6G,25G). Styrene, fixed investment (76F, 38F). Subject index (29L, 44L). Sulfur Frasch process, fixed investment (76F). From H,S, fixed investment (76F, 38F). VOL. 50, NO. 5
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MAY 1958
757
Sulfuric acid Investment (76F, 38F). Manufacture (37F). From waste pickle liquor ( 6 F ) . Tankers, ocean, transportation costs (8C). See also Freight. Tanks Storage ( S A , 120). Wooden (22A). See also Vessels. Taxes Data (5C, 70C). Effects on profitability (40C, 7E, 4823). Tetraethyllead, fixed investment (38F). Thickeners, continuous (23A, 720). Titanium dioxide, fixed investment (76F). Titanium tetrachloride manufacture ( 73F). Toluene, fixed investment (76F, 75G). Tolylene diisocyanate, fixed investment (76F). Towers, fractionating (78A, 79A, 27A, 720).
Transformers (32B). Trichloroethylene, fixed investment ( 76F). Tubes, heater (720).
Unit Operations EquipmentInvestment and Operating Cost Data (1A) Arcand, H. J., Chem. Eng. Costs Quart. 6, 97-101 (October 1956). Investment; rotary a n d belt feeders. (2A) . . Zbid., pp. _ _ 102-3. Investment: mixer. (3A) Chem. Eng. 64, 192, 194 (August 1957). Investment: wet cas scrubber. (4.4) Chem. Eng. News 35, 52, 54 (Nov. 4, 1957). Mechanical compacting. (5A) Chem. Eng. Progr. 53, 25 (June 1957). Investment; heat exchanger. (6A) Chem. Week 80, 83-4 (July 20, 1957). Investment; dust collector. (7A) Cost Engineering, 2,81-3 (July 1957). Investment; agitators. (8A) Doyle, H., Brooks, A. F., IND.END. CHEM.49, 57A-58A, GOA, 62.4 (December 1957). Investment; wet impingement dust collector. (9A) Hagerty, W. J., First Annual AACE Meeting, Durham, N. H., June 26, 1957. Tanks; vessels; heat exchangers. (10A) Hardy, W. L., IND.END.CHEM.49, 53A-54A (December 1957). Turbulent film evaporators. (11A) Mills, H. E., Chem. Eng. 64, 242-4 (September 1957). Investment; belt conveyers. (12A) Mulcahy, P. H., Chem. Eng. Costs Quart. 6, 84-8 (October 1956). Investment; screw conveyers. (13A) Mulcahy, P. H., Cost Engineering 2, 49-54 (April 1957). Investment; disintegrators. (14A) Murray, F. J., Jr., Chem. Eng. Costs Quart. 6, 89-?6 (October 1956). Spray drymg equipment. (15A) National Carbon Co., Catalog Section S-6800. Investment; heat exchangers (5A).
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758
INDUSTRIAL
Turbines Gas (23A). Steam (23A). Uranium processing (33F, 35F). Urea, fixed investment (768’). Utilities, operating (30C). See also Individual utilities. Vacuum distillation ( 720). Valves (78A, 33B). Vanillin, fixed investment (76F). Vessels ( S A ) . See also Tanks. Vessels, steel pressure ( 7 5 0 ) . Vinyl acetate, fixed investment (76F). Vinyl chloride, fixed investment (76F). Wages. See Labor rates. Walls (25B). Waste treatment (5B, 37.L). Water (3B). Water cooling (78B, 22B, 30B). Water, demineralization systems ( 78B, ZOB, 24B, 30B). Water from the sea (4B, 77B, 73B, 76B). Water softening. See Water demineralization. Water treating. See Water demineralization systems. Xylene, fixed investment (76F, 38P).
(16A) Rubin, F. L., Chem. Eng. 64, 257-8 (May 1957). Investment; heat exchangers. (17A) Samfield, M., Cost Engineering 2, 106-9 (October 1957). Investment; dust-collecting equipment. (18A) Sarvadi, G., “Data for Cost Estimation-Impervite Standard Impervious Graphite Processing Equipment,” Falls Industries, Inc., Solon, Ohio, 1957. (19A) Scheibel, E. G., Chem. Eng. 64, 238-40 (November 1957). Solvent extraction columns. (20‘4) Whitley, D. M., Zbid., 64, 308, 310, 312, 314, 316 (September 1957). Investment; plastic heat exchangers. (21A) Zenz, F. A., Petrol. Rejiner 36, 179-81 (March 1957). Investment; columns. (22A) Zimmerman, 0. T., Lavine, I., Cost Engineering 2, 20-2 (January 1957). Investment; wood tanks. (23A) Ibid., pp. 113-14 (October 1957). Investment; filters, thickeners, compressor, turbines.
Auxiliary Eqwipmeaf, Utilities, and Offsite FcaciBitieP-investment and Operating Cost Data
A N D ENGINEERING CHEMISTRY
(1B) Arndt, F. W., IND.ENG. CHEM. 49, 61A-62A (April 1957). Investment; ducts. (2B) Can. Chem. Processing 41, 58-60, 62, 64, 66 (May 1957). Piping insulation. (3B) Chem. Eng. 64, 215 (January 1957). Water availability a n d current cost. (4B) Zbid., pp. 215-16. Water from sea. (5B) Zbid., pp. 186, 188 (April 1957). Waste disposal.
(6B) Zbid., pp. 160, 162 (September 1957). Investment; chromatograph and infrared analyzer. (7B) Chem. Eng. News 35, 64 (Jan. 28, 1957). Computers. (8B) Zbid., pp. 88, 90 (Feb. 4, 1957). Investment; infrared spectrophotometers. (9B) Ibid., pp. 77-9 (Aug. 19, 1957). Gas chromatography. (10B) Zbid., pp. 113-14 (Sept. 23, 1957). Data handling equipment. (11B) Ibid., p. 32 (Kov. 18, 1957). Water from sea; operating cost only. (12B) Zbid., 41, 44, 46, 48 (Dec. 7, 1957). Laboratories. (13B) Chem. Week 81, pp. 55-6, 58 (Nov. 23, 1957). Water from sea. (14B) Clark, W. G., Chem. Eng. 64, 243-6 (July 1957). Piping, material, a n d labor costs. (15B) Clayton, C. C., Cost Engineering 2, 42-8 (April 1957). Investment; steam-jet refrigeration. (16B) Gillman, J. S., Jr., Chem. Eng. Progr. 53, 68, 70 (Decernbrr 1957). Water from sea. (17B) Heating, Piping, Air Conditioning 26, 123-4 (June 1956). Air conditioning. (18B) Helwig, J . D., McConomy, H. F., Oil Gas J . 5 5 , 101-6 (Dec. 2, 1957). Water demineralization. (19B) Hicks, T. G., Petrol. Rejiner 31, 96 (Januaryl952). Compressed air; nomograph. (20B) Kahler, F. H., Reents, A. C., Chem. Eng. 64, 206-10 (January 1957). Water demineralization operation. (21B) Kallina, 0. T., First Annual AACE Meeting, Durham, N. H., June 27, 1957. Pipelines. (22B) Katell, S., Faber, J. H., Cost Engineering 2, 70-6 (July 1957). Water cooling. (23B) Katell, S., McGee, J. P., Zbid., 2, 5-9 (January 1957). Compressed air. (24B) Katz, W. E., Chem. Eng. Progr. 53, 190-3 (April 1957). Water demineralization. (25B) Kiernan, F., Cost Engineering 2, 55-8 (April 1957). Building costs. (26B) Klima, B. B., Zbid., 2, 88-105 (October 1957). Pump investment. (27B) Littleton, C. T., “Industrial Piping,” Schnell Publishing, New York, 1957. (28B) Lynch, E. G., Schoenberg, J., Chem. Eng. 64, 259-62 (August 1957). Pumping costs. (29B) Mavris, N. B., Oil Gas J. 5 5 , 116-19 (May 27, 1957). ECOnomic balance by payout. (30B) Nelson, W. L., Zbid., 5 5 , 132 (Jan. 7, 1957). Water cooling and demineralization. (31B) Zbid., p. 131 (Aug. 12, 1957). Current power cost summary. (32B) Power 100, 128 (February 1956). Power distribution equipment, investment. (33B) Rase, H. F., Barrow, M. H., “Project Engineering of Process Plants,” Wiley, New York, 1957. (34B) Taylor, D. M., Petrol. Eng. 29, B-48, B-50-2 (March 1957). Compressors, packaged.
(35B) Thomas, E. I., Oil Gas J. 55, 113-16 (March18,1957). Pneumatic control systems. (36B) Thomas, E. I., Petrol. Processing 12, 97-101 (April 1957). Pneumatic control systems. (37B) Vick Roy, T. R., Chem. Eng. 64, 274-9 (June 1957). Automatic data handling systems. (38B) Warren, A. S., Pardo, V. A., Cost Engineering 2, 10-19 (January 1957). Instruments.
Estimation of Manufacturing Cost Items-Data and Techniques (1C) Allen, C. B., N.A.C.A. Bull. 38, 1237-49 (June 1957). Distribution of overhead charges. (2C) Bary, C. W., Brown, W. T., Power App. and Systems 6, 230-49 (June 1957). Effect of depreciation on taxes and returns. (3C) Bergfeld, A. J., Earley, J. S., Knobloch, W. R., “Pricing for Profit and Growth,” Consultant Reports on Current Business Problems, No. 4, McGraw-Hill, New York, 1957. (4C) Brown, E. C., Natl. TaxJ. 8, 81-98 (March 1955). Effect of depreciation method on cash generated. (5C) Business Week, No. 1454, 112-14 (July 13, 1957). Listing of income and other taxes by state. (6C) Chem. Eng. News 35,96, 98 (Sept. 9, 1957). Freight rate increase. (7C) Zbid., pp. 78-82 (Sept. 30, 1957). Water compared to other transportation means. (8C) Chem. Week 80, 56-7 (Jan. 5, 1957). Ocean freight rate increase. (9C) Z6id:ip. 58. Freight rate increase. (lOC) Zbid., pp. 48, 50 (May 11, 1957). State tax changes. (11C) Zbid., pp. 21-2 (Nov. 16, 1957). Inadequacy of depreciation allowances. (12C) Cook, P. W., Jr., Haruard Business Rev. 35, 74-80 (July-August 1957). Intracompany pricing. (13C) Davis, D. S., Petrol. Refiner 36, 164 (March 1957). Nomograph for annual depreciation allowance under sum of the years’digits. (14C) Doan, L. I., Chem. Eng. Progr. 53, 8 , 12, 16 (September 1957). Inadequacy of depreciation allowances. (15C) Earp, M. H., Analysts J. 13, 71-2 (Fvember 1957). Depreciation as a capital source. (16C) Edmonds, W. J., Natl. Tax J . 8, 99113 (March 1955). Accelerated depreciation methods. (17C) Factory Management and Maintenance 115, 109-19 (September 1957). Labor. (18C) Fortune 54, 227-8, 231-2 (December 1956). Employee benefits. (19C) Foy, F. C., Natl. Znd. Con$ Board Business Record 14, 520 (November 1957). Pricing; depreciation. (20C) Gaffney, B. J., Petrol. Refiner 36, 137-46 (December 1957). Review of depreciation signiiicance.
(21C) Genereaux, R. P., Chem. Eng. News 35, 34-8 (Oct. 7, 1957). Distribution costs. (22C) Gropper, F., Chem. Eng. Progr. 53, 465-75 (October 1957). Direct labor. (23C) Haines, T. B., Zbid., 53, 556-62 (November 1957). Direct labor. (24C) Hardy, W. L., IND.ENC. CHEM. 49,57A-58A (April 1957). Packaging and material handling costs. (25C) Herr, R. R., “Herr’s Depreciation Tables, Computation and Comparison of Depreciation Allowances under the Internal Revenue Code of 1954,” Fallon Publications, New York, 1954. (26C) Jelen, F. C., Chem. Eng. 64, 271-5 (September 1957). Use of taxes in capitalized cost analyses. (27C) Keller, I. W., N.A.C.A. Bull. 38, 635-46 (January 1957). Pricing by return on investment. (28C) Mahon, J. J., Jr., editor, J. Accountancy 103, 77-8 (February 1957). Tax treatment of lease agreements. (29C) Morrow, L. C., “Maintenance Engineering Handbook,” Sect. 5, McGraw-Hill, New York, 1957. Costs and Budgets for Maintenance Operations. (30C) Murphy, W. J., Eng. Economist 3, 13-33 (summer 1957). Taxes a plied to public utilities. (31C) N at Assoc. Accountants, ‘LAccounting for Labor Costs and LaborRelated Costs,” Research Report No. 32 (1957). Labor and employee benefits. (32C) Nation’s Bus. 48, 42-3, 48, 51-3 (November 1957). Emdovee benefit projections. (33C) Nelson, W. L., Oil Gas J. 55, 148 (Feb. 25, 1957). Labor rates by area; inflation indexes. (34C) Zbid., p. 149 (April 22, 1957). Comparative transportation costs. (35C) Zbid., p. 86 (Dec. 23, 1957). Labor rates. (36C) Pierce, D. E., IND.ENG. CHEM. 49,55A-56A (May 1957). Maintenance survey. (37C) Soa Chem. Specialties 33, 41-3, 101 hovember 1957). Building maintenance. (38C) Thompson, D. A,, Eng. Economist 3, 39-51 (summer 1957). Legislative hearings on rapid amortization. (39C) Wall Street J. 150,5 (Sept. 13,1957). Increase i n barge rates. (40C)Weaver, J. B., Eng. Economist 3,l-12 (summer 1957). Importance of taxes in economic evaluation. (41C) Wobus, R. S., Chem. Eng. Progr. 53, 581-5 (December 1957). Direct labor. (42C) York, 0. S., South Texas Section, AIChE, Oct. 18, 1957. Increasing importance of maintenance
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