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THINK OF THE FUTUR1 IN RECKONING COSTS

25th November 1938
Page 42
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Page 42, 25th November 1938 — THINK OF THE FUTUR1 IN RECKONING COSTS
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Which of the following most accurately describes the problem?

IF readers of this series of articles will reconsider what they have read and then peruse the ,introduction and explanatory matter to " The Commercial Motor Tables of Operating Costs." thereafter reading the instructions which are issued with " The Commercial Motor Operating Costs Record," they will find that the same underlying principle applies throughout. I refer to the need for making use of estimated costs and for recording actual costs as a check upon the estimates.

The first essential, for the successful carrying-on of the business of a haulage contractor, is that he should be aware of what his vehicles are really going to cost him per hour or per mile throughout their lives. Linked up with that is corresponding information as to what he should charge per hour and per mile, or per hour or per mile, this latter information being supplementary to that about cost of operation, since it must provide also for business costs and for profit.

How the Costs Tables Help.

All this is possible without keeping any records of operating costs at all, merely by making discreet use of the figures in " The Commercial Motor Tables of Operating Costs." Therein are set out data which form a sure guide to the average cost of operation of all kinds and sizes ot vehicle. In those Tables, appropriately linked to the figures of cost, are those for charges for hire.

The Operating Costs Record carries the operator a step farther. It provides means whereby lie can keep records of some of the items of cost, but leaves him in the pos-tion of relying upon the Tables for the others. He actually records expenditure on petrol, oil and wages, also corresponding figures for mileage run and

hours worked The other seven of the 10 items of operating costs are provided in the shape of estimates.

The result is that each week he can ascertain, as the result of the combination of actual costs and estimated data, what is the total operating cost of his vehicles, within a narrow margin of error. He may, if he so desires, check these figures against those in the Tables.

In either of these two ways, costing is made very easy, so that those least familiar with the use of figures can arrive at a proper basis for their charges. They may use only the Tables, and thus obtain the figures they need without any records at all, or they may use the Record in conjunction with the Tables and thus arrive at the information in a way which probably is more satisfactory, in that there is, amongst the total for operating costs, a leaven of actual costs data.

• Notwithstanding all the trouble I have taken to make cost recording easy, I hold steadfastly to the view that the wise haulage contractor will keep his own records of actual cost. I stipulate only that when he does so he must make sure that not one single halfpenny of expenditure is overlooked—in particular, that every maintenance operation, no matter how small, be appropriately debited to the vehicle concerned. That principle has been strictly adhered to in the case of the Operating Costs Record. It is true that on 52 pages there is provision for entry of estimated costs as regards tax, insurance, garage rent, interest, and, particularly, tyres, maintenance and depreciation, yet the book does not end there.

After those pages come others, some set apart for recording of actual expenditure on maintenance, others for actual expenditure on tyres. There are some spare sheets to be used for either of those two purposes, in case the pages set apart specifically are not sufficient.

It should be appreciated that given actual recording of expenditure on tyres and maintenance, hardly any thing is left to estimate. Of the other items, four. namely, tax, insurance, garage rent and interest, are known, whilst depreciation is a factor which can be reckoned with some accuracy only when the vehicle is disposed of and the actual difference between buying price and selling price is known.

Accompanying this article are examples of typical entries for expenditure on maintenance and tyres, as envisaged when preparing the Operating Costs Record.

Accurate Maintenance Records.

The pages on which maintenance expenditure is to be recorded provide, first of all, for a reference to the vehicle concerned. Then there is a division of the page, one part being devoted to " labour " and the other to "materials." The typical entries shown need explanation only so far as two important matters are concerned.

First, there is the item under the heading of " Materials" opposite the date January 12, 1938. To identify this entry it is marked with an asterisk. The operation is "Repair front off-side wing." In the ordinary course of events, the reader would have expected this to have been entered under the column "Labour." In this case, however, the guard had to be welded. As this particular operator has no welding appliances the work was done entirely outside the operator's premises. In such circumstances the entry should be made under "Materials," The other point of importance arises in connection with the entry of expenditure on labour. Many comparatively inexperienced men would be inclined to the view that the amount to be set down here is merely that of mechanics' wages per hour, multiplied by time. That is not correct. The time allowance must, of course, be taken into consideration, but the amount per hour is not merely what is paid to the mechanic (or driver, if he does the work). It is something considerably in excess of that, the difference being due to the provision for overhead expenses in the maintenance department.

This is to provide for such expenditure as rent and rates, for upkeep of the building (occasional painting and decoration, heating, lighting and water supply), for cleaning, for the provision of equipment, tools, etc., for supervision and clerical work in connection with the recording of men's time, for costing, and so on. These items mean an addition of from 50 per cent. to 100 per cent. to the actual wage rates, so that, if the mechanic be actually paid, say, ls. 8d. per hour, the actual amount per hour to be debited against the vehicle may be anything from 2s. 8d. to 3s. or even more. Consideration of that fact will enable the reader to understand why, for example, 8s. is debited for the work of washing, polishing and greasing a vehicle. S.T.R.

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