2.5.

Maintenance Cost
Maintenance is needed to maintain the condition of the facilities or plant equipment by
repairing or replacing unusable things in order to obtain a satisfactory state of production
operation. Maintenance is required both for factories, offices, and supporting equipment so it
can be used continuously and optimal production quality can be assured. In determining
maintenance cost, we used Seider handbooks, 2003. According to Seider, included under
annual maintenance cost is the main item, maintenance wages and benefits (MW&B), which
is estimated as a fraction of total depreciable capital, CTDC.
Maintenance cost which is include in handling is maintenance wage and benefits
(MW&B), salaries benefits, materials and services and maintenance overhead. Depending on
whether the process handles for wage and benefits, we used Solid-fluid handling processing
(4.5% of CTDC) categories, because in our plant have two kind namely solid and liquid.
Salaries and benefits for engineers and supervisory personnel are estimated at 25% of
MW&B. Material and services for maintenance is estimated at 100% of MW%B, while
maintenance overhead is estimated at 5% of MW&B.
The values total depreciable capital for crumb rubber plant is $13,249,279 with
production capacity 14,279 ton/year. The calculation of maintenance cost can see at the table
below.
Table 2.1. Maintenance Cost

Wages and Benefit (MW&B)

596,217.57

Salaries & benefit (engineers & supervisory personnel)

149,054.39

Materials and services for maintenance

596,217.57

Maintenance overhead

29,810.88

Total annual maintenance cost

$ 1,371,300.41

2.6. Other Costs

Other Costs are the costs that also important accounted in the development of a plant,
although this is not the main cost that will determine the economics of a plant. This costs
include insurance, distribution cost, marketing and brand cost, CSR and R&D cost.
2.6.1. Properties Taxes and Insurance Cost
Annual property taxes are assessed by the local municipality as a percentage of the
total depreciable capital, CTDC, with a range from 1% for plants located in sparsely populated
areas to 3% when located in heavily populated areas (Seider, 2003). We uses 2% of CTDC as
property taxes because our plant located in industrial area that not really a sparsely populated
areas but not heavily populated areas.

Insurance is cost that paid to insurance company that cooperate with our Plant.
Insurance is the way to protect the company assets, both movable and fixed. Based on to
JAMSOSTEK for insurance employee, the fare of Jaminan Kecelakaan Kerja (JKK) of all
employees that work for chemistry industries include in group III for insurance. Insurance for
group III is 0.89 % from monthly salary. Total of Expenses for insurance employee is
$136.69. Total expenses for insurance will be describe in table below,
Table 2.1. Insurance Cost

Type of Insurance

Specification

Cost ($/year)

Worker Insurance

3,224.75

3,224.75

Properties Tax Cost

264,985.59

264,985.59

268,210.34

Total

2.6.2. Distribution Cost

From assignment 1, we have decided that our plant will supply worldwide demand
because local demand of crumb rubber is lacking. All of our products will be delivered to
Port to be exported to overseas. The distribution cost are calculated only based on the needs
oh product delivery to the port. Distribution costs from the port to the consumer will be borne
by consumers.
The nearest port from our plant is Port of Belawan. Its about 15 km from our plant.
The distribution cost included the fuel of truck, maintenance of truck, driver and helper
salary, and retribution cost. We have three trucks to transport our product.
Table 2.1. Distribution Cost

Incurred Cost

Price (US$/truck)/year

Amount

Fuel of Truck

954.00

2,862.00

Maintenance of Truck

773.00

2,319.00

Driver + helper

$ 3,000.00

9,000.00

Retribution

$ 6,111.11

$ 18,333.33

Total

Total (US$/year)

$ 32,514.33

2.6.3. Marketing and Brand Cost

In this plant design, we are only going to market our product by 2 kinds of media
marketing, which is website and through proposal. We are not going to have any brand in our
product so the other marketing is not necessary. And the brand cost, is the cost that we have
to pay every year to maintenance the name of the brand of the plant. It is based on Indonesia
Law. Our marketing cost can be seen from table below.
Table 2.1. Marketing and Brand Cost

Type of Marketting

Price (US$/year)

Proposal

38.00

Website Development

100.00

Brand

74.07

212.07

Total

2.6.4. Additional Cost

In general expenses there are CSR and R&D cost Corporate Social Responsibility is
consisted of national disaster, academic and social infrastructure. According to Indonesian
Law, the CSR cost is 2-3% of the revenue of the plant. For Research and Development the
cost is 1% from CAPEX.
Table 2.1. Additional Cost

Type of Cost

Total Cost (US$/year)

CSR

978,412.94

R&D

169,093.58

1,147,506.52

Total
2.7. Depreciation Cost

Depreciation is the reduction in value of an asset. The way to depreciate an asset is a

way to account for the decreasing value of the asset to the owner and to represent the
diminishing value of capital funds invest. Salvage value is the estimated trade-in or market
value at the end of the assets useful life. The salvage value, S expressed as an estimated
dollar amount or as a percentage of the first cost, may be positive, zero, or negative due to
dismantling and carry-away costs.
The list of all equipment have been elaborated in Capital Expenditure section. We have
equipment and building as our assets. The equation used in this declining balance method of
depreciation is: (Blank & Tarquin: 5th edition. Ch.16 Authored by Dr. Don Smith, Texas
A&M University):
d max =0,1
(2.2

d t =d max ( 1d max )t
t1

B V t =B V t1 ( 1d t )

)
(2.3
)

Where:
dmax = maximum depreciation rate

dt = depreciation rate for t-year

BVt = book value for t-year

t = year of depreciation

The depreciation rate is for main equipment, supporting and also building. We have the
assumption of 10% this is according to main depreciation for national assets.
Table 2.1. Total Depreciation

Year
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Total Depreciation

$
$
$
$
$
$
$
$
$
$
$

Depreciation
507,020.76
456,318.68
410,686.81
369,618.13
332,656.32
299,390.69
269,451.62
242,506.46
218,255.81
196,430.23
3,302,335.49

This depreciation each year leads to the salvage value. Salvage value is the estimated
resale value of an asset at the end of its useful life. After we end our production we can get
back the money from our assets which are called salvage value. The salvage value counted in
the table at Appendix B for Depreciation cost. From the calculation in Appendix B.1, we can,
at least, have salvage value around US$ 1,767872.06 at the end of the plant life time.

CHAPTER 4
AUTSTANDING ISSUE
1.1. Technical Aspect

1.2. Economical Aspect