Team:Purdue/Policy and Practices/Cost-Benefit Analysis


Cost-Benefit Analysis



For the purpose of analysis, a product similar to Minecrobe named Milky Spore is considered. Milky Spore which contains Bacillus popilliae, a species inhabiting the soil which infects and kills grubs. Due to the similarities between Milky Spore and Minecrobe many analogies can be made especially in the manufacturing and packaging processes as well as costs and benefits of those processes. The main differences between the two products are their purpose and the scale at which they are intended to be used. Milky Spore is a home and garden pesticide while Minecrobe aims to be an industrial product to promote nutrient uptake in crops.

Costs: How much will Minecrobe cost?

There are two main cost types associated with the production and distribution of the final Minecrobe product: initial costs and recurring costs. Initial costs include the costs of research and development, lab time, reagents, and parts. Recurring costs include those incurred in creating, growing, and shipping the final product. The recurring costs influence the final price a great deal more than initial costs, because the initial costs are spread over all Minecrobe produced, while recurring costs are not.

Initial Costs

The initial costs of the product were near-zero given that all the research and development was performed using the generous donations from our sponsors. The following table contains initial cost information:

The following items will be necessary to produce Minecrobe on an industrial scale:

1. Prices from a representative of The Fitzpatrick Company.

Recurring Costs

Material Costs

In order to determine recurring costs, all the reagents necessary to produce Minecrobe along with the amount needed per batch made must be taken into account. The following table includes information on the cost of the sporulation medium used:

Notes: Amount needed per 12 L: (mM/1000)*molecular weight * 12L. Price per 12 L culture (USD): (price per container)/ (Container weight/Amount needed). All prices obtained through Sigma-Aldrich Online. The unit price of sporulation medium seems high but may be decreased by purchasing reagents in bulk. Purchasing in bulk can reduce the price to 40-60% of the current price based on average bulk-price reduction data obtained from Sigma-Aldrich Online.

Due to the high prices of the reagents needed for the purification step, a modified protocol will be used. The 12 liter culture will be split into 12 liter stocks, each of which will be centrifuged to produce a pellet. The supernatant will then be discarded, the pellets resuspended in 15 ml of water, and combined back into a 180 ml solution. The resulting solution will then be frozen and vacuum dried, and the powder containing spores and cells will be mixed with calcium lignosulfonate and formed into pellets.

Creating Granules

There are three main costs associated with turning the spores into the final granular product. By far the largest cost is that of purchasing the machine needed to make the granules. Second is the cost of the binding agent, calcium lignosulfonate, and finally is the cost of growing Minecrobe. Based on prices from, one metric ton of calcium lignosulfonate can be purchased for $200-500 (USD). One metric ton can be used to create seventy-three 30-lb. batches of granules. This brings the price per 30 lb. unit of calcium lignosulfonate to $2.75-6.80 (USD).

Bag Costs

We will package the final granule product in 10 lb. bags to be shipped out in sets of three. Decision on the type of bag was based on three qualities: size, price, and durability. The bags need to be able to hold 4.5 liters of granules which was rounded to 5 liters to account for uncertainty. The price of the bags was also an important consideration. Since Minecrobe is designed to combat anemia, a disease which is more prominent in developing countries, all considerations to lower the price were taken into account. Finally, a bag was needed that would be durable enough to handle all the possible conditions that it might encounter during shipping and storage. For that reason, a polyethelyne bag with a width of 6 in, a depth of 3 in, and a height of 20in was selected. This bag costs 6.1 cents per bag when purchased in bulk.

Shipping Costs

To calculate shipping costs, the United States Postal Service Postage Price Calculator was used because of the program’s widespread use and the calculator’s flexibility of options, specifically weight and box dimensions. As described on the Scaling Up page, the box is to be 10in x 10in by 10in to hold 15L in volume, and must hold three 10 lb packages. Using the Postage Calculator we determined the cost to ship a package of the above weight and dimensions to Mumbai, India and to Cape Town, South Africa. These cities were chosen because they are large ports in two of the target markets of Minecrobe and they possess robust transportation networks. Furthermore, India and South Africa are in close proximity to other countries suffering from high levels of anemia. The cost to ship one box to Mumbai was $175.20 (USD) and $212.70 (USD) to ship to Mumbai.These prices would fall dramatically if demand is ever high enough to warrant the purchase of a shipping container.

Laboratory Space

An appropriate laboratory space will be an unavoidable recurring cost. However, due to the simplicity the materials being used, the size of the lab can be small and consequently cheap. Using the price per foot of office space in and around the Purdue Research Park, an average estimate for the type and size of space required is $15 per square foot per month.Thus, the 500 sq. foot lab estimated as appropriate for this project will cost $7,500 per month, with a utility cost of $250 per month, which would bring the total cost of renting and using a lab space to $7750 per month.


Given the production costs of $307.56 (USD) per unit we estimate that we will need to round up to $500 sales price per unit to remain solvent. Given that it takes about 4 days to grow a single 30 lb. unit we estimate that will be able to culture, package, and ship 7.5 units per month. After subtracting the costs we will receive $1443.3 (USD) per month.

We will therefore need to run six 12 liter cultures at the same time. This six-fold increase will bring in $8659.8 (USD) per month. Subtracting monthly lab costs we will have $909.8 (USD) remaining. Per year that is $10,917 (USD) in income, which will be used to pay off the initial costs of purchasing a Roll compaction Unit ($160,000 USD). Assuming no variation in costs or prices, it will take 15 years to begin to make a profit.

Considering the time it will take to begin to produce a profit an increase in scale and reduction in cost should be considered. This will include larger batch sizes, possibly on the scale of 10x increase. Reducing shipping and manufacturing costs by transporting and buying in bulk will also decrease unit costs. An increase in price could also be considered but this would likely lead to a substantial reduction in sales in Minecrobe’s target market.