In 2005 225 kW 300 hp compressors and associated equipment w

In 2005, 225 kW (300 hp) compressors and associated equipment were installed at a food processing plant in Shepparton (country Victoria) for air services to the processing line at a cost of $320,000. In early 2015 an engineer was asked to estimate the cost of a similar system, but for 100 kW (135 hp), in a new plant at Port Melbourne.

Estimate the budget cost of the compressor and associated equipment. Clearly show all of your working. State any assumptions that you have made, and justify them.

Table 2. Cost factors for locations in Australia Location Sydney and other major metropolitan cities 1.0 Major resource area in or near settled Relative cost 1.1 to 1.4 communities Remote areas-for example, Pilbara Kimberleys, North Queensland 1.4 to 1.8

Solution

The estimation of three crucial factors for determining the cost is:

Earlier the plant was located at Shepparton which falls under the category of relative ost of 1.1-1.4

Melbourne is under the category of metropolitan cities where the relative cost is 1.0

The cost of plant in Melbourne in 2005 would have been= $320000/1.1= $290909

Estimated cost at beginning of 2015= Installation cost * Mechanical equipment cost index in 2014/mechanical equipment cost index in 2005

Estimated cost at beginning of 2015= $290909 * 1080/915.1

Estimated cost at beginning of 2015=$343330

C2= C1 [(Q2/Q1)^X]

Where

C2= Cost of equipment 2

C1= Cost of equipment 1= $343330

Q2= Capacity of equipment 2= 135hp

Q1= Capacity of equipment 1= 300hp

X= Cost Capacity component value= .9

C2= $343330 [(135/300)^.9]

C2= $343330 [.4874]

C2= $167339

Hence, the estimated budget cost is $167339