1.

1 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
asset’s 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 has been elaborated in Capital Expenditure section. In this plant
design, 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):
𝑑𝑚𝑎𝑥 = 0,1

𝑑𝑡 = 𝑑𝑚𝑎𝑥 (1 − 𝑑𝑚𝑎𝑥 )𝑡 (2.2)

𝐵𝑉𝑡 = 𝐵 𝑉𝑡−1 (1 − 𝑑𝑡 )𝑡−1 (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. The assumption
of 10% is according to main depreciation for national assets.
Table 2.1. Depreciation Scheme
Value Main Equipment Supporting Equipment Land and Building Total
Initial
31,538,556,207 1,379,425,000 30,074,451,850
Value
D 3,153,855,621 137,942,500 3,007,445,185 6,299,243,306
Year 1
SV 28,384,700,586 1,241,482,500 27,067,006,665
D 2,838,470,059 124,148,250 2,706,700,667 5,669,318,975
Year 2
SV 25,546,230,528 1,117,334,250 24,360,305,999
D 2,554,623,053 111,733,425 2,436,030,600 5,102,387,078
Year 3
SV 22,991,607,475 1,005,600,825 21,924,275,399
D 2,299,160,747 100,560,083 2,192,427,540 4,592,148,370
Year 4
SV 20,692,446,727 905,040,743 19,731,847,859
 D 2,069,244,673 90,504,074 1,973,184,786 4,132,933,533
Year 5
SV 18,623,202,055 814,536,668 17,758,663,073
D 1,862,320,205 81,453,667 1,775,866,307 3,719,640,180
Year 6
SV 16,760,991,849 733,083,001 15,982,796,766
D 1,676,088,185 73,308,300 1,598,279,677 3,347,676,162
Year 7
SV 15,084,783,664 659,774,701 14,384,517,089
D 1,508,479,366 65,977,470 1,438,451,709 3,012,908,545
Year 8
SV 13,576,314,298 593,797,231 12,946,065,380
D 1,357,631,430 59,379,723 1,294,606,538 2,711,617,691
Year 9
SV 12,218,682,868 534,417,508 11,651,458,842
D 1,221,868,287 53,441,751 1,165,145,884 2,440,455,922
Year 10
SV 10,996,814,581 480,975,757 10,486,312,958
D 1,099,681,458 48,097,576 1,048,631,296 2,196,410,330
Year 11
SV 9,897,133,123 432,878,182 9,437,681,662
D 989,713,312 43,287,818 943,768,166 1,976,769,297
Year 12
SV 8,907,419,811 389,590,363 8,493,913,496
D 890,741,981 38,959,036 849,391,350 1,779,092,367
Year 13
SV 8,016,677,830 350,631,327 7,644,522,146
D 801,667,783 35,063,133 764,452,215 1,601,183,130
Year 14
SV 7,215,010,047 315,568,194 6,880,069,932
D 721,501,005 31,556,819 688,006,993 1,441,064,817
Year 15
SV 6,493,509,042 284,011,375 6,192,062,939
D 649,350,904 28,401,137 619,206,294 1,296,958,336
Year 16
SV 5,844,158,138 255,610,237 5,572,856,645
D 584,415,814 25,561,024 557,285,664 1,167,262,502
Year 17
SV 5,259,742,324 230,049,214 5,015,570,980
D 525,974,232 23,004,921 501,557,098 1,050,536,252
Year 18
SV 4,733,768,092 207,044,292 4,514,013,882
D 473,376,809 20,704,429 451,401,388 945,482,627
Year 19
SV 4,260,391,283 186,339,863 4,062,612,494
D 426,039,128 18,633,986 406,261,249 850,934,364
Year 20
SV 3,834,352,154 167,705,877 3,656,351,245 7,658,409,276

2.8. Cost Breakdown of Operational Expenses

After calculating all operational expenses, we can know the percentage of each cost. Raw
material is the biggest one.
After calculating all operational expenses, it can be known the percentage of each cost.
Raw material is the biggest one.
Table 2.2. Cost Breakdown
Outcome Cost %
 Raw Material 7,673,000 82.23%
Indirect Labor Salary 365,750 3.92%
Direct Labor Salary 613,200 6.57%
Utilities 180,616 1.94%
Maintenance 375,771 4.03%
Insurance and Tax 37,166 0.40%
General Expenses 85,834 0.92%
TOTAL 42,096,339,401 100.00%

1%
4%0%
2% Raw Material
7%
Indirect Labor Salary
4%
Direct Labor Salary
Utilities
Maintenance
Insurance and Tax
82%
General Expenses

Figure 2.1. Cost Breakdown of Operational Expenses