What is the approximate annual cost of a raw material purchased for $2 per liter that flows into a chemical process at 10 liters per minute?
A. $1 million
B. $2.5 million
C. $5 million
D. $7.5 million
E. $10 million
The annual cost of material valued at $1 per unit flowing at one unit per minute can be calculated as follows:
($1/unit) x (1 unit/minute) x (60 minute/hour) x (24 hours/day) x (365 days/year)
The calculated value is $525,600 per year, but this can be approximated as $500,000 per year and used as a rule of thumb.
Therefore, the approximate annual cost of this raw material is Answer E: $10 million (2 x 10 x $500,000).
Additional complicating factors
The value of the flowing material should be considered when selecting a flowmeter because more accurate measurement can often enable tighter control. In some applications, this can enable the plant to consume a lower amount of the raw material, making the process more efficient.
In general, measuring materials with large economic value can often justify the purchase of more accurate (and often more expensive) flowmeters.
David W. Spitzer is a regular contributor to Flow Control magazine and a principal in Spitzer and Boyes LLC, which offers engineering, seminars, strategic, marketing consulting, distribution consulting and expert witness services for manufacturing and automation companies. Spitzer and Boyes is also the publisher of the Industrial Automation INSIDER. He has more than 40 years of experience and has written more than 10 books and 350 articles about flow measurement, instrumentation and process control.
Spitzer may be reached at 845-623- 1830 or via spitzerandboyes.com. Click on the "Products" tab to find his Consumer Guides to various flow and level measurement technologies.