Question

Which of the following, in a thermal power plant. is not a fixed cost ?
1. Fuel cost
2. Interest on capital
3. Depreciation
4. Insurance charges

Answer 1

Correct Answer - Option 1 : Fuel cost

Running or operational cost of the power system:

• The concept of the running cost is quite simple. It solely depends on the number of units produced or generated.
• In a power generating plant, the main operational cost is the cost of fuel burnt per unit of electrical energy generation.
• The cost of lubricating oil, maintenance, repairs, and salaries of operating staff are also accounted for the operating cost of the plant.
• Since these charges are proportional to the number of units generated. For generating more units of electrical energy the required running expenditure is more and vice versa.

 

Fixed cost:

• Initial cost or fixed cost is essentially capital costs and land.
• Fixed cost is the cost that is independent of max demand and units generated.
• The fixed cost is due to the annual cost of a central organization, interest on the capital, cost of land, and salaries of higher officials, Depreciation, Insurance charges.