Question

Name two types of costs involved in producing steam under power house costing.

Hint:

Fixed costs stay constant, variable costs depend on output.

Answer 1

Under power house costing, costs are classified to find out the total cost of producing utilities like steam, electricity, or gas.
The two main types of costs involved in producing steam are:
1. Fixed Costs: These are the costs that do not change with the level of steam production.
They include depreciation of boilers, salaries of permanent staff, and insurance charges for equipment.
2. Variable Costs: These change according to the amount of steam produced.
Examples include cost of fuel (coal, oil, or gas), water treatment, lubricants, and wages for temporary workers if required.
Accurately classifying these costs helps determine the cost per unit of steam and supports efficient cost control.