BP plc applies Lean accounting principles to optimize its energy production operations. The COGS for energy production includes costs of exploration, production, and allocated operational overhead. For the current fiscal quarter:

Requirements:

• Calculate the COGS for energy production using the formula: COGS = Exploration Costs + Production Costs + Allocated Operational Overhead.
• Present a detailed COGS breakdown in a table.
• Recommend strategies to reduce COGS, such as investing in efficient production technologies and optimizing operational processes.
• Discuss how reducing COGS aligns with Lean energy sector principles.
• Provide a numerical example with hypothetical values demonstrating the calculation of COGS and potential savings.

COGS Table:

Category	Amount ($)
Exploration Costs	M
Production Costs	N
Allocated Operational Costs	O
Total COGS	M + N + O

Numerical Example:

• Exploration Costs: $20,000,000
• Production Costs: $50,000,000
• Allocated Operational Costs: $10,000,000
• COGS = $20,000,000 + $50,000,000 + $10,000,000 = $80,000,000

BP aims to reduce COGS by 8% through efficiency improvements, potentially saving $6,400,000 annually.