Updating of a fixed capital
Raw materials, products and energy prices, labor and construction costs change at different rates, and plant construction cost indexes are actually a composite, able to compare generic chemical plants capital costs.
Chemical plant cost indexes are dimensionless numbers employed to updating capital cost required to erect a chemical plant from a past date to a later time, following changes in the value of money due to inflation and deflation.
Since, at any given time, the number of chemical plants is insufficient to use in a preliminary or predesign estimate, cost indexes are handy for a series of management purposes, like long-range planning, budgeting and escalating or de-escalating contract costs.
A cost index is the ratio of the actual price in a time period compared to that in a selected base period (a defined point in time or the average price in a certain year), multiplied by 100.
Thanks to an intuitive user interface, Sage Fixed Assets—Depreciation gives you the flexibility to manage the entire fixed-asset life cycle—from acquisition to transfers and disposals—for both public and private organizations.
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For example, while CE, M&S or IC Index are typically employed for chemical process industries, the ENR (Engineering News-Record) construction index is used for general industrial construction and takes in account the prices for fixed amounts of structural steel, cement, lumber and labor.