Question

In: Accounting

what are the fixed cost variable cost, semi variable cost and sunk cost for oil and...

what are the fixed cost variable cost, semi variable cost and sunk cost for oil and refinery sector companies like HPCL, IOL etc?

Solutions

Expert Solution

Fixed cost: Fixed cost is the cost which is constant at overall level. They do not change with increase or decrease in production and sales

Fixed cost for Oil and Refinery sector includes

· Factory Supervisory charges

· Factory and Office buildings depreciation

· Plant depreciation

· Head office management salaries

· Advertisement expenses

· Travel expenses

Variable cost: Variable cost is the cost which varies at per unit level. They change as per increase or decrease in production and sales

Variable cost for oil and refinery sector includes:

· Cost of crude cost used as raw material

· Cost of labor deployed in shop floor of production

· Indirect materials like consumables, lubricants, oil, cotton waste, etc

· Indirect labor deployed in shop floor

· Contractor manpower charges deployed in shop floor

· Dealer commission

Semi-variable cost

Semi variable cost is the cost which has both elements of fixed cost and variable cost.

Semi-variable costs for oil and refinery sector includes:

· Cost of electricity

· Cost of utliities like water and steam energy

· Plant maintenance

Sunk cost:

Sunk cost is the cost which is incurred in past and not relevant for current decision making.

Sunk cost for oil and refinery sector includes

· Book value of plant and equipment

· Depreciation expense

· Employee training expense


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