How to Use the Analysis Sheet
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Having Described the Form on which Accounts of Operating Expenses are to be Kept, "The Commercial Motor" Costs Expert Describes How to Note Actual and Estimated Figures of Weekly Expenditure in the Record IN my previous article I dealt with the initial stages in preparation of the analysis sheet and explained the medning of all the items which are set out at, the top. These preliminary steps are easy and do not involve the haulier in any great arnount of calculation. I estimate that . hour per annum will suffice.. . The next step is more important, for-when he takes it the haulier will really be setting out to record his operating costs in a way which, besides being simple, is, sufficient to ensure that at the end of the first week he will know -what his operating costs are going to be, although, as regards several items of cost, the actual amounts will not be known for .some time. The place of those items is taken by estimates, based on the data given in "The Commercial Motor Tables of Operating Costs." Right at the start, however,while I was proceeding to explain the items at the top of the sheet, ,I discovered that one of my sheet anchors in this matter of recording costs has gone. My insistence that there are 10 ifems in a complete schedule of operating costs -has gone by the board. From now on, and for, most likely, a number of years I must admitthat there are 11, six standing charges and five running costs. The new item which -has brought about this stage is the levy which has tobe paid in respect of' every goods vehicle which weighs 30 cwt. unladen or over. It appears among the standing charges at the top right-hand corner of the analysis sheet.
The Total Items • The 11 items are now: fuel, oil, tyres, maintenance, depreciation, wages, Road Fund tax, vehicle insurance, garage rent, interest on first cost, and the levy. These are all the operating costs there are, and any expenditure which cannot be properly debited to one of them must be dealt with under establishment costs.
NOw to refer once more to the schedule of costs. First of all comes the date of the entry, the actual figure being that of the week ending.Now we come to the 11 items. I begin with the running costs and wages. The six items of 'standing charges are already entered.
Column No. 18 is provided for the total of those items, and therefore the total of operating costs per week. In the next column, NO. 19, that weekly total is divided by the number of miles run, thus giving us the cost per mile.
Next come the establishment costs, and when these have ban added to the total vehicle operating costs, the total A34
expenditure per week is reached, and that is the informatic which the operator must have asa basis for the asscssme of his rates and charges.
I have already referred tO the fact that in dealing wi tyres and maintenance I recommend, in the first place, th estimated. figures be .used, there being as yet no true da available. Nevertheless, I am insistent that the haulier shou at once commence to niake provision for the Compilatic of figures which in time will show what are the actu amounts he is spending on those items.
I allow space for -that in the' analysis sheet. What I c is to provide for the' entry of actual as well .as the estimatt costs. This can be seen, for example, under the main headit of tyres. There are two columns allotted, Nos. 7 and Column No. 7 is for the estimated cost of tyres, which 11 already been assumed and entered on the top of the she
as 3.00d, per mile. Actual expenditure, on tyres is be entered in column No. 8.
Four Columns There are four columns for the entry of maintenan. costs; the first isfor estimated costs, based on the figure 20, per mile as stated among the -entries at the top of tl schedule in the first column. The other three are for recor ing actual expenditure on maintenance; No. 10 for labou No. 11 for materials and No. 12 for the total of these two.
I must not overlook that another item of expenditur that on the establishment, is also one concerning which ti newcomer will have little or no knowledge. This is ni an item which I can deal with in the same way as for tyr and maintenance.' The headings required for that wou be too numerous. I shall show how it can be done, hos ever, separately.
For the time being, I am going to ignore the provisic for actual expenditure. I shall devote some of rOy availah space to that matter subsequently. For the present I wi consider only the estimated costs, these being all that ti operator has available during the early months of his expet ence. I shall also show how to keep records of the fu and oil used. The actual expenditure on these items shou be available from the drivers' log sheets.
A vehicle purchased on October 20, 1951, was actual put into service on Monday, October 29, and the first we for which the records are compiled is that ended Novernbi 3, when the vehicle ran 832 miles. In that week 70 galloi a fuel, costing £13 2s. 6d., were consumed, and gallon
3ricating oil, costing 3s. 9d. These are straightforward tries which any operator can make.
Next, we come to tyres, the estimated cost of which is 3d.
r mile, the total cost for that week is to be found by thiplying the tyre cost of 3d. per mile by the miles run, 2. The amount is £10 8s.. What is meant by that is that running those 832 miles the vehicle has worn away or 2..d £10 8s. worth of tyres and the operator must include tt amount in his costs. •
Maintenance costs are dealt with in the same way. The iintenance cost is assumed to average 2111. per mile. By iltiplying 2111. by 832 we get the £8 13s. 4d. .underthe ading of estimated maintenance costs, as set 'down in • lumn No. 9.
Similarly with depreciation, an item which is not as easy deal with as tyres or maintenance. The agreed amount, ;!ording to the schedule, is 2.20d. per mile. For 832 miles amount is E7 12s. 611., as set down. That can be inter!led as the value of the wear and tear which the vehicle
s suffered in running those 832 miles. It can also be, tked upon as the contribution towards a fund from which be drawn the money to buy a new vehicle when the !sent one is worn out.
jndcr the main heading of "Wages," it should be noted .t there are three columns, Nos. 14, 15 and 16. The first for the entry of the actual amounts paid to the driver that week. It should be noted that the amount to be ered here is the gross amount with no deductions on !ount of P.A.Y,E. The driver's wage for the week we are cussing was £6 12s. 911. In the second of these three urnns, No. 15, there should be entered the employer's nribution on account of National insurance, 2s. 911. in beginning, but rising to 5s, per week. The third column for the proper proportion of what the haulier pays his urers in order to cover himself against liability under the nkmen's Compensation Act; I have assessed that at 6d.
-7inally, in these vehicle operating costs there must be ered the standing charges. In this column, No. 17, the nutor should put the total of standing charges, actually 10s., taken from the figures already dealt with and set up the right-hand corner of the sheet.
Ile total of these vehicle operating costs, which is what are looking for, is to be entered in column 18. It is tnd by adding together the amounts in columns No. 4, el); No. 6 (oil); No. 7 (tyres, estimated cost); No. 9 (mainance, estimated); No. 13 (depreciation); No. 14 (wages); 15 (National Insurance contribution); No. 16 (employer's sility insurance); and No. 17 (standing charges). When haulier has the necessary information, the actual figures expenditure on tyres and maintenance should be used. Instead of taking figures from the column headed "Estimates," he will set down these actual costs in the appropriate columns.
For the time being 1 propose to ignore the figures for actual expenditure; the reader should note that these columns set apart for actual expenditure are• omitted from those enumerated above. The total cost per week is £55 7s. 1d., as shown by the entries in column No. 18.
An important item of cost which may be useful in a
variety of ways is the cost per mile of running the vehicle. Provision is made for the entry of that item in column No. 19. To obtain it the operator must take the total of operating costs Shown in column No. 18 and divide it by the number of miles the vehicle has covered during the week, in this case 832. . The outcome of that division' is 15.96d. That is as near as can be ascertained during the early years of the operator's experience. He should make a mental Dote of it and, if asked for a snap quotation while away from his books, be able to make use of that figure to advantage. It will be sufficiently accurate if he takes it to be Is. 411. per mile.
That figure must not, however, be used indiscriminately It can be applied only when the work for which the quotation is asked involves 800-900 miles per week. For a lower number of miles per week the cost per mile will be more. It may be as well to digress here and emphasize that point by taking an example.
Suppose the mileage was not 832 but 332. Now let us go through the items again, noting the difference.
Column No. 4, is £5 4s. 9d.; No. 6, Is. 3d.; No. 7, £4 3s.; No. 9, £3 9s. 211.; No. 13, £3 Os, 1011.; No. 14, £6 12s. 911.; No. 15, 5s.; No. 16, is. 6d.; No, 17, £8 10s. The total is £31 8s. 3d. That is per week; the cost per mile is that sum divided by the mileage, 332. The operator will find that the operating cost per mile is 22.7011., nearly •ls. 1111., compared with nearly is. 4d.
Up to now 1 have dealt only with vehicle 'operating costs. There is still, however, an additional item of expense, a collective item covering a number of. small ones, and that is establishment costs. Tentatively I have agreed these at £3 17s, 6d, per week, although I shall show ultimately that that is a serious underestimate. However, the figure has been agreed and must be used appropriately if the proper total of expenditure is to be assessed. It must be set down in column No. 20 and then added to the total of vehicle operating costs, £55 7s, Id., to give us the total weekly outgoings, £59 4s. 711., as set down in column No. 21.
In column No. 22 is recorded the revenue earned by
the vehicle in the week, and in column No. 23 the balance, profit or loss, obtained by subtracting the amount , of the weekly expenditure in column No. 21 from that of the weekly revenue in column No, 22. The result shows a profit of £8 7s. 111. from the operation of the vehicle during the week-an insufficient profit, but that point is by the way.
No operator can complain that there is a large amount of work involved in preparing the record of costs. Even if it gives a little difficulty for the first week or two, he will soon get into the way of it and find that 10 minutes per vehicle at the most is all that is needed each week. The outcome, sensibly applied when dealing with the assessment of rates and charges, will be worth while and probably ensure a profitable return, whereas, without the information provided by these figures, a growing loss will accrue and; ultimately, the cessation of the business.
In a later article I shall discuss how to arrive at the figures for actual costs, as distinct from the estimated operating costs.