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Raashid, Chemical Engineering

Economics

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Ch.E.-309 Chemical Engineering Economics:

Credit Hours 3( Theory)

Contact Hours 3( Theory)

Classes (if online) as pre-recorded lectures available on youtube

One credit hour : 50 minutes of classroom teaching

35-40 mins recorded lecture on youtube

10-15 minutes discussion on Zoom/ Whatsapp
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About Course:
This course aims at imparting the following knowledge to you:

➢Introduction to Marketing
➢ Selection criteria of suitable location for a specific plant
➢Introduction to Cost Accounting
➢Cost Estimation method of process equipments and whole plants
➢Product Cost Estimation, Profit and Loss Calculations, Breakeven Calculations
➢Fixed Costs (Depreciation, Interest, Insurance, Taxes)
➢ Where to Invest? Do I Invest? (Profitability and Alternative Investments)
especially in relation with decision regarding installation of plant

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Course Prerequisites:

➢Minimum Third Year Standing

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Course Outline:
(1) Importance of economics in engineering (2) Market and process surveys in
relation to feasibility analysis (3) Plant location (4) Estimation of capital
investment (5) Physical plant cost (6) Manufacturing cost (7) General expenses
(8) Interest, taxes, insurance, and depreciation (9) Sales and profit (10) Cost
accounting (11) Alternative investments and replacements (12) Marketing

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Textbook(s):
• Towler, G., & Sinnott, R. (2013). Chemical Engineering Design:
Principles, Practice and Economics of Plant and Process Design.
2nd edition: Elsevier Butterworth.

• Peters, M., Timmerhaus, K. and West, R. (2006). Plant design and

economics for chemical engineers. Boston: McGraw-Hill.

• Peters, M. and Timmerhaus, K. (1991). Plant design and economics

for chemical engineers. New York: McGraw-Hill.

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Your Teacher:
Muhammad Raashid

Office: 1st floor of Department

In case of assignment discussion, any problems or need of advice, contact by any

means convenient to you (email, whatsapp, call, asking directly, etc)

Email : [email protected]
[email protected]

Cell No. : 0313-8910887

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Breakdown:

Topics to be Covered by Mid:

Marketing, Market Survey, Cost Accounting, Fixed Cost Estimation

Topics to be covered after Mid:

Product Cost, Profit & Loss Calculations, Breakeven Calculations, Fixed Costs
(Depreciation, Interest, Taxes, Insurance), Profitability, Alternative Investments
and Replacements

Note: Detailed lecture plan can be downloaded from LMS shotrtly.

Lecture No 1 (M.Raashid), Chemical

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Engineering Mathematics
 Course Learning Outcomes (CLOs):

Cognitive PLO
CLO Statement
Level Mapping
CLO-1: Students will be able to apply Cost Estimation and
Economic Principles for Fixed Assets and Complete Plants in C-3
PLO-11
Process Industry. Apply

CLO-2: Students will be able to analyze Financial Statements to

C-4
extract useful information for Financial Analysis. PLO-2
Analyse
CLO-3: Students will be able to evaluate Decisions regarding
Investments and Replacements using Profitability Analysis C-5
PLO-6
incorporating time value of money, taxes and depreciation Evaluate

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Engineering Mathematics
Marks & Assessments:
Sessional = 30, Midterm Exam = 30, Final Exam = 40

➢ Sessional will include two Quizzes of 5-10 marks each which may contain any type
of questions. There will be 2 or 3 assignments which will carry 10-15 marks total.

➢ In addition, a few marks may be awarded in rare cases for excellent class
participation or extraordinary assignment.

➢ THE FINAL EXAM WILL BE COMPREHENSIVE (As per university

regulations, 20% of final exam will be based on course covered before mid term
exams)

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Make up Assessments/ I grade:
➢Leave can not act as an excuse for make-up assessments (quizzes or exam).

➢ There will be no make-up assessments.

➢However students who miss any quizzes or exam due to genuine medical reasons
or severe emergency but otherwise have good attendance/ class participation
record will be awarded I grade as per university regulations after approval from the
Chairman. Cases of such students will be dealt in the next semester. Please note
that students having less than 50% attendance are not eligible for I grade as per
university regulations.

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Engineering Mathematics
Grading:
➢A+ and A grades will be only awarded on display of exceptional ability and standout
performance. Only getting the highest marks in the class is not enough.

➢As per university regulations, grades will be awarded based on relative standing of
a student in class. However grades distribution will be based on the cumulative
performance and response of class.

➢For grading purposes, both sections will be considered as one class and combined
grading will be done.

➢I usually use a class average of around B (3 GPA +- 0.1) excluding the WF and I
grades. Therefore normal distribution or bell curve with class mean of B (3 GPA +-
0.1) will be followed along with unavoidable deviations. Please refer to next slides.

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What is Economics? (There is no unique definition of economics)
❑Economics is a science of wealth. (Derived from “Wealth of Nations”, Adam

smith, 1776. Adam Smith is considered as the pioneer of political economy.)

❑Economics is study of mankind in the ordinary business of life; it examines that

part of individual and social action which is most closely connected with the

attainment and with the use of the material requisites of wellbeing. Thus it is on

one side a study of wealth; and on the other, and more important side, a part of

the study of man.” (Alfred Marshall’s Principles of Economics, the most influential

book in economics)
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Most Used Current Definition:

❑Economics is the social science which examines how people choose to use

limited or scarce resources in attempting to satisfy their unlimited wants.

TANSTAAFL

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Shift of Focuses in Chemical Engineering:

•Right from Start : Process Improvement

•1960s : Economics

•1980s : Process Safety

•1990s : Optimization, Debottlenecking

•Start of 21st Century : Energy/ Material Integration, Auto Control

• Recently : Sustainable Processes, Process Intensification

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Economics in Chemical Engineering:
•Preliminary Screening of Alternatives
•Cost Estimation of New Facilities/Equipment
•Cost Optimization
•Obtaining necessary information from financial documents
•Calculating Cash Flows (Know how of product cost, taxes,
depreciation, insurance required)
•Considering Alternative Investments and Replacements

Economics: Lab vs Industry. Expensive materials vs efficiency

“Money Changes Everything”

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Career Prospects for Chemical Engineers:
(Based on Economics)

•Cost/ Cost Control Engineer

•Business and Economics Engineer
•Planning Engineer
•Design Engineer
•Process Engineer
•Operations Engineer

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