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COST ITEM
Cost of tires used on Geo Prisms
Salary of Public Relation manager for NUMML plant.
Annual Awards dinner for Corolla Suppliers
Salary of Engineer who monitors design changes on Geo Prism.
Freight costs of Corolla engines shipped from Toyota city , Japan ,to Fremont, California
Electricity costs for NUMML plant (single bill covers entire plant)
Wages paid to temporary assembly line workers hired in periods of high production(paid o
hourly basis)
Annual fire insurance policy cost for NUMML plant
Lease payment by Skoda for corporate office
Payment to government and Environmental tax per car produced
direct or indirect variable or fixed
direct variable
indirect fixed
direct fixed
direct fixed
direct variable
indirect semi-variable

direct variable

indirect fixed
indirect fixed
direct variable
QUESTION3
QUESTION3
QUESTION-2

COST ELEMENT

COST OF RAW MATERIAL CONSUMED

PURCHASE OF STOCK IN TRADE

CHANGES IN INVENTORIES OF FINISHED

GOODS/WIP/STOCK IN TRADE

EMPLOYEE BENEFITS EXPENSE

FINANCE COSTS

DEPRECIATION & AMORTIZATION COST

OTHER EXPENSES

TRANSPORTATION

EXCISE DUTY/OCTROI

REPAIR & MAINT MACHINERY

REPAIR & MAINT BUILDING&OTHERS

POWER AND FUEL

STORES AND SPARES

PACKAGES CONSUMED

OFFICE ADMIN- RATES/TAXES

RENT
UTILITIES

TERMINATING & RELATED

TRAVELLING & CONVEYANCE

INSURANCE
COMMUNICATION EXPENSES.

AUDIT EXPENSES

WRITE OFFS

PROVISIONS

CSR
OTHERS

FIRST WE ANALYSE CONTRIBUTION OF EACH OF THE COST AND REVENUE ELEMENTS TO COMPANY OV
COST ELEMENT
COST OF RAW MATERIAL CONSUMED
PURCHASE OF STOCK IN TRADE
CHANGES IN INVENTORIES OF FINISHED
GOODS/WIP/STOCK IN TRADE
EMPLOYEE BENEFITS EXPENSE
FINANCE COSTS
DEPRECIATION & AMORTIZATION COST
OTHER EXPENSES
TRANSPORTATION
EXCISE DUTY/OCTROI
REPAIR & MAINT MACHINERY
REPAIR & MAINT BUILDING&OTHERS
POWER AND FUEL
STORES AND SPARES
PACKAGES CONSUMED
OFFICE ADMIN- RATES/TAXES
RENT
UTILITIES
TERMINATING & RELATED
TRAVELLING & CONVEYANCE
INSURANCE
COMMUNICATION EXPENSES.
AUDIT EXPENSES
WRITE OFFS
PROVISIONS
CSR
OTHERS

REVENUE FROM OPERATIONS

SALES FROM PETROLEUM PRODUCTS
CRUDE OIL SALES
INCOME THRU SUBSIDIES BY GOVT

LESS EXCISE DUTY

OTHER OPERATING REVENUES

STRATEGY TO INCREASE OVERALL COMPANY PROFIT BY 10%

91% of the COGS is on account of Crude oil/Petroleum product Purchase other cost elements contribut
prices/exchange rates/exise duties cannot be controlled by the PSU company. Hence the Focus is to be
of Annex-G in Annual Report 2014-15 :

Diesel Contributes to 51.30% of Company's Revenue

Petrol Contributes to 20.15% of Company's Revenue
Retail SBU contributes to 71.45% of Company Revenues.

Hence in order to Achieve a profit Jump of 10% to company a profit jump of 10/71.45% =
Current overall PBT is 7415, 14% will mean Rs.1038 Crore.

Company has currently 12,089 ROs (petrol pumps). Revenue Can be increased by three Means:

A) Market is decontrolled for pricing Retail Selling Price of Petrol and Diesel can be increased at Pre
If only 1% increase in RSP of MS (65paise) and 0.5% RSP of HSD (25paise) is done Compa
51.30% contribution of Diesel from overall revenue of 2.4Lac Crore= 1.2312 Lac Crore; a 0.5% increa
unchanged
20.30% contribution of MS from overall revenue of 2.4Lac Crore= 0.4836Lac Crore; a 1% increase in th

B)The Sale of Premium Products also Gives an Edge to the company with higher revenues.
With an increase in Sales of premium fuels by 1Lakh KL Per month and with margins of 1039 per Kl ov
below:
100000KL PERMONTHX1039PERKLX12MONTHS=124CRORE PER ANNUM

C) Increase in No of New RO commissionings by 1000 per year will lead to company Margins of Rs.

COMPANY MARGINS/KL
NORMAL PETROL
SPEED PETROL
DIESEL
PER RO COMPANY MARGINS/MONTH (RS)
COMPANY MARGINS PER YEAR FOR 1000 PUMPS (CRORES)

TOTAL OF A)+B)+C) IS 1099+124+240 IS 1463 CRORES /ANNUM WHICH IS WELL ABOVE TA

 FIXED/
AMOUNT
VARIABLE

94424 VARIABLE

117051 VARIABLE

4513 VARIABLE

2085 FIXED

583 SEMI-VARIABLE

2516 FIXED

5003.62 VARIABLE

1498.76 VARIABLE

619.09 SEMI-FIXED

261.4 FIXED

1736.12 SEMI-VARIABLE

119.6 SEMI-VARIABLE

150.35 VARIABLE

69.23 FIXED
223.89 FIXED
223.41 FIXED

175.93 FIXED

155.38 FIXED

52.83 FIXED
 35.06 FIXED

0.77 FIXED

1.58 FIXED

161.69 FIXED

76.01 FIXED
1132.48 FIXED

UE ELEMENTS TO COMPANY OVERALL OUTPUT

RS CR CONTRIBUTION TO OVERALL COST
94424 40.55
117051 50.26
4513
1.94
2085 0.90
583 0.25
2516 1.08
0.00
5003.62 2.15
1498.76 0.64
619.09 0.27
261.4 0.11
1736.12 0.75
119.6 0.05
150.35 0.06
69.23 0.03
223.89 0.10
223.41 0.10
175.93 0.08
155.38 0.07
52.83 0.02
35.06 0.02
0.77 0.00
1.58 0.00
161.69 0.07
76.01 0.03
1132.48 0.49
232869.2

RS CR CONTRIBUTION TO OVERALL SALES

243954.36 99.50
1215.67 0.50
 245170.03
7903.19

-15167
181.64

e other cost elements contribute very less and can be ignored.. This cost is not controllable as international crud
mpany. Hence the Focus is to be on Increaseing of the Revenue Considering Cost as almost Fixed. Ref Director Re

profit jump of 10/71.45% = 14% will be required in Retail.

creased by three Means:

Diesel can be increased at Premium Outlets. It is called Micro Market Pricing.

D (25paise) is done Company additional profits will reach 1099 Crores as below:
.2312 Lac Crore; a 0.5% increase in the RSP will lead to add profit of

36Lac Crore; a 1% increase in the RSP will lead to add profit

with higher revenues.

d with margins of 1039 per Kl overall profit will increase by

ead to company Margins of Rs. 240 Crore Per annum as below

RS
739
1,039
748
199,939 CONSIDERING AVERAGE AVG 40KL PETROL 20KLSPEED 200KL DIESEL
240 SAY 240 CRORE PER ANNUM FOR 1000ROS

M WHICH IS WELL ABOVE TARGET OF 1038 CRORES

REMARKS

Cost of Crude procured is a variable component depending upon

exchange rate, domestic demand

It is regarding finshed petroleum products from other Oil Cos and

is variable depending on domestic demand & Excise duties

It varies with amount of stock /inventory kept based on exchange

rate and Govt Taxes
IT is independent of production as the number of employees in a
PSU are fixed and daily wagers or production specific manpower
is not there.

It involves borrowing that varies depending on varyind domestic

demand. However some of the borrowing is for projects not
related to projects, hence it is a semi0veriable cost.

It is as per the accounting rules and independent of production

based on demand transportation changes-like rakes/tank lorries

charges etc.
the more the production/transportation the greater the
octroi/excise

If more production leads to more wear and tear and more

maintenance then it Is a variable component, otherwise fixed.

It is a fixed administrative costing

If power and fuel is linked to production it is fvariable, otherwise
fixed
If the spares /consumables increase with production like
additives, blends, chemicals etc, these will be variable otherwise
fixed
Packages like Lube containers, barrells, Gas cylinders change
with production, hence variable.
It is a fixed administrative costing
rents for leased sites is independent of production
expenditure on utilities is independent of production
expenditure on TERMINATING & RELATED is independent of
production
expenditure on TRAVELLING & CONVEYANCE is independent of
production

expenditure on INSURANCE is independent of production

 expenditure on COMMUNICATION EXPENSES. is independent of
production

expenditure on AUDIT EXPENSES is independent of production

expenditure on WRITE OFFS is independent of production

expenditure on PROVISIONS is independent of production

expenditure on CSR is independent of production

expenditure on OTHERS is independent of production

N TO OVERALL COST

N TO OVERALL SALES
and can be ignored.. This cost is not controllable as international crude
eing of the Revenue Considering Cost as almost Fixed. Ref Director Report

e required in Retail.

ts. It is called Micro Market Pricing.

nal profits will reach 1099 Crores as below:
P will lead to add profit of 616 Crore per annum as COGS remains

ead to add profit 483.6 Crore per annum as COGS remains unchanged

will increase by 124 crore (only an avg 8-10KL Per RO Sales in crease) as

er annum as below

VERAGE AVG 40KL PETROL 20KLSPEED 200KL DIESEL

E PER ANNUM FOR 1000ROS

038 CRORES