What is the capital cost that must be considered for a Project?

Capital cost are associated with the one time fixed cost in construction that include fixed assets like building, land and equipment that is used or benifits for more than one financial year.

Capital cost includes following spends:-

1. Land or property acquisition
2. Consultant fees
3. Labors
4. Statutory fees
5. Project insurance, taxation and financing
6. Materials, plant and equipment
7. Commission
8. Fixture and fittings
9. Internal cost directly related to the developement of project

The cost associated with the one-time expenditure like the acquisition of land, construct fixed assets, operational cost, repairs, maintenance, and replacement is called a capital cost of the project.

Following are some of the examples of capital cost:

1. Property acquisition
2. Commissions on various materials.
3. Consultant fees for development and enhancement
4. Materials and equipment charges.
5. Labourer charges.
6. Transportation cost.
7. Project insurance, worker insurance, cost of safety measures
8. Taxation and financing.

Cost of the day by day working is:

1. Wages
2. Utilities.
3. Workers daily cost.
4. Rents.
5. Repair and emergency charges
6. Other administrative expenses.

The capital cost of the project :

In simple words, I am defining here the capital cost of the project.

Definition :

The total cost needed to bring a project to a commercially operable is called as the capital cost of the project.

Capital cost not depend on the following factors :

• Accounting
• Tax laws
• Materiality

Capital cost includes living expenses :

• Purchase of plants and machinery
• Intangible assets like trademarks and software development

Basically, the capital cost is not limited to the initial construction of a factory.

Example: fossil fuel power plant’s capital costs include the following;

• Purchasing the land upon the plant is supposed to be built
• Permits and legal costs
• Essential equipment is needed to run the plant
• Cost involving the construction of the plant
• Financing and commissioning the plant.

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Capital costs are fixed, one time expenses incurred on the purchase of land, buildings, construction and equipment used in the production of goods or in the rendering of services. In other words it is the total cost needed to bring a project to a commercially operable status.