• Aug
  • 30
  • 2013

Iteration for calculating utility cost

CMA Asim Saha 

CMA Asim SahaHow to calculate cost per unit of cost object in a situation of reciprocal consumption of resources between each others. For example in a chemical manufacturing unit various types of utilities are required. But each utility render services to others and vice-verse. Say in a unit manufacturing chemicals there are 7(seven) types of utilities are required to produce namely  STEAM , POWER, RAW WATER, P-WATER,DM WATER,C-WATER & COMPRESSED AIR (C-AIR).     

The production of above utilities are 1.Steam 608378 MT 2.Power152963738 kwh 3.Raw water 3445270 m4.P-water 106931m3  5. DM water 700964m3 6.C-water61289266m3 & C-air 33335948nm3.

Now out of 608378 MT of steam 12476 MT captively consumed and balance consumed by production activities. Again out of 152963738 kwh of power generated 4410474kwh consumed by steam , 9486318 kwh by power itself,1326349 kwh by raw water, 473456kwh by p-water, 1641689kwh by DMwater,7017127kwh by c-water and 2654303kwh by c-air. And balance by production activities. For other utilities pl refer xls sheet which can be downloaded.

Now the problem is how to calculate the cost per unit of utilities considering reciprocal services between each others. Iteration method plays a great role in this type of exercise. Some of the CMA use linear equation method followed by Cost Matrix but nevertheless iteration method can be used very easily and result will be same.

The rate so calculated is applied to production activities followed by consumption .

Download the xls sheet for clear understanding attached with this write up – Click to Download.

(Author can be reached at asah456@gmail.com )


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