the costing column Starting to cost
Page 47
If you've noticed an error in this article please click here to report it so we can fix it.
• The Commercial Motor Tables of Operating Costs have been published regularly since 1911, and the number printed continues to increase. With justification it can, therefore, be claimed that standard costings, when well compiled, have a part to play in assisting operators of both goods and passenger vehicles in their continuing drive to obtain higher operational efficiency.
However, despite the success of the CM Tables, it is not intended that their publication should obviate the need for operators to record the cost of operating their own vehicles in their own particular conditions. Rather the reverse with the CM Tables providing a starting point or introduction to costing by individual operators.
Such an introduction does necessitate more effort and determination on the part of the operator if the subject of costing is to be mastered. It is possible to make some use of the cost figures shown in the CM Tables without understanding the principles on which they are compiled. But more effective and comprehensive use will come from a better understanding of how they are compiled.
There are no corresponding alternatives for an operator when it comes to keeping adequate record of the cost of operating his own vehicles. From the start, he must understand at least the basic principles as well as the practice of costing vehicle operation.
Fundamentally, transport is concerned with the movement of goods or passengers. Each movement constitutes a journey. To have purpose and completeness each journey must involve loading, proceeding and unloading.
Inherent in these three activities are the two elements of time and mileage. Because they are basic to road transport, the items of cost directly chargeable to the operation of specific vehicles are correspondingly divided into two groups. One is termed "Standing costs" and reflects the time element in road transport operation. The second droup is called "Running costs" and, as its name implies, is related to the mileage run by each vehicle.
It should be noted that standing costs are items of expense which have to be met throughout the period 'the vehicle is in the operator's possession. They are being incurred all the time the vehicle is in use whether loading, on the' move or unloading. They are also being incurred while the vehicle is not in use—for example, when there is no work for it or it is being serviced or repaired.
To enable standing costs to be analysed readily and to good purpose it has been found worth while when compiling the CM Tables over many years to divide them into 10 items and, by a coincidence, with five items in each group.
The five items of standing costs are: licences; wages; rent and rates; insurance and interest.
The five items of running costs are: fuel; lubricants; tyres; maintenance and depreciation.