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How Overtime Affects Costs
Page 100
Page 103
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Extra Work Caused By Non-productive Delays Can Exercise a Depressing Effect on Revenue
WHEN comparing the operating costs of a 16-ton oiler with a four-wheeled lorry and trailer, I referred, in last week's article, to the practice of charging wages at the basic rate payable for 44 hours. Whilst more time would normally be required when higher weekly mileages were averaged, an agreed scale of hours relative to mileage would be difficult, if not inipossible, to select. This is because of the many variations in loading times, routeing and types of traffic carried, which could all subsequently affect the overall time required to complete both collection and delivery.
When operating costs and charges have been calculated on the basis of a 44-hour week, the whole of the standing costs should have been covered by the revenue received for work done during that period. Thus, the weekly standing costs of the rigid eight-wheeler detailed last week totalled £17 16s. Id., or 8s. Id. per hour. Of the five items of standing costslicences, wages, rent and rates, insurance and interest-the only one which will continue beyond 44 hours will be wages.
The basic rate laid down by R.H.(66) for a driver of a vehicle with a carrying capacity of 15-18 tons is £9 8s. per week in Grade 1 areas. The hourly rate is 4s. 3,1,(1., or 5s. 4d. at time-and-a-quarter, 6s. 5d. at time-and-a-half and 8s. 64d. at double time. It will be seen, therefore, that only when Ike driver is working at the double rate will the amount payable to him for work done beyond 44 hours be more than the basic hourly standing cost calculated on a 44-hour week.
Specific Jobs
My comments so far have been made with average standard costs in mind.. There are many occasions, however, when operators may wish to calculate charges for specific jobs or periods of hire, involving overtime working. To help them I will detail the operating costs of three types of vehicle, showing the variation in the total operating costs when working 44, 55 and 66 hours a week. Additionally, corresponding costs will be shown for weekly mileages of 800' and 1,000.
Dealing first with a petrol-engined 7-tonner, the annual licence duty would be £35, assuming the unladen weight to be 2 tons 18 cwt. This would be the equivalent of 14s. per week.
In the first instance wages will be reckoned on a basic 44-hour week, with appropriate allowances for holidays with pay and insurance contributions, giving a weekly total of E9 1 Is. 6d. Rent and rates in respect of garaging the vehicle will be reckoned at I Is. 6d. and vehicle insurance at 16s. 6d. per week, on the basis of an annual premium of £41 5s. A charge of 3 per cent, interest on the capital outlay equals 14s. 7d., giving a total standing cost per week of £12 8s. Id.
The first item of running costs-fuel-is calculated at 4.50d.
B38 per mile on the basis of an estimated rate of consumption of 10 m.p.g. Lubricants will be set at 0.27d. per Mile. Tyres are placed at I.48d., calculated on a cost per set of £186 and an estimated mileage life of 30,000. Maintenance is reckoned at 2.67d. per mile. Depreciation amounts to 1.41d.; this figure is obtained by first deducting the cost of the initial set of tyres from the price of the vehicle, together with the estimated residual value. A vehicle life of 150,000 miles is assumed. Running costs thus total 10.33d. per mile.
Corresponding running costs per week on the assumption of a weekly average of 800 miles would be: Fuel, £15; lubricants, 18s.; tyres, £4 18s. 8d,; maintenance, £8 18s.; depreciation, £4 14s.; total, £34 8s. 8d. Total operating costs per week would be £46 16s. 9d.
Driver's Wages When a 55-hour week was worked, and assuming no double. time was involved, the driver's wages would amount to £12 I Is. 2d., giving a standing cost of £15 7s. 9d. per week. The corresponding operating costs per week would be £49 16s. 5d. For 66 hours, still assuming no double-time working, wages would be £15 16s. 8d. and standing costs .would total £18 13s. 3d. Total operating costs would amount to £53 Is. Ild.
Relative to the total operating costs, wages equal 20.44 per cent. when 44 hours are worked, 25.26 per cent. for 55 hours and 29.82 per cent. for 66 hours.
Assuming, in the first instance, that 800 miles per week are averaged, standing costs per mile when the driver works 44 hours are 3.72d. The corresponding costs are 4.62d. at 55 hours and 5.60d. at 66 hours. These sums, added to tfae total running costs per mile of 10.33d., give total operating costs per mile of 14.05d. at 44 hours, I4.95d. at 55 hours and 15.93d. at 66 hours.
Where the weekly average mileage is 1,000, standing costs per mile will be 2.98d., 3.69d. and 4.48d. per mile at 44, 55 and 66 hours respectively, giving corresponding operating costs per mile of 13.3Id., 14.02d. and 14.81d.
The next vehicle chosen as an example is a 13-ton sixwheeled oiler with an unladen weight of 64 tons. The annual licence duty will be £105, or £2 2s. per week. Wages fall into the 10-15 ton payload category and amount to £9 17s. 10d. per 44-hour week. Rent and rates will be increased to 12s. 6d. and insurance to £1 14s. 7d. Interest on the capital outlay of £3,830 will amount to £2 6s., giving a total standing cost per week of £16 12s. 11d.
Despite the greater size of the vehicle, the estimated rate of fuel consumption remains at 10 m.p.g., because it is an
oiler. Lubricants are reckoned at olad. per mile and tyres at 2.82d., assuming a set to cost £355. Maintenance is estimated at 2.80d. per mite and depreciation at 2.88d., this time on an assumed vehicle life of 250,000 miles. Running costs per mile, are, therefore, 13.38d. Corresponding running costs per week will be: Fuel, £15 6s. 8d.; lubricants, 18s. 8d.; tyres, £9 8s.; maintenance, £9 6s. 8d.; depreciation, £9 12s.; total, £44 12s. This gives a total operating cost per week of
£61 4s. lid. . .
For a 55-hour week the driver's wages will amount to £13 3s. 6d., making the total standing cost per week. £19 18s. 7d. and the total. operating cost £64 10s. 7d. Correspondingly, when 66 hours are worked, wages will amount to
£16 7s. 5d., standing costs to £23 2s... 6d. and total operating costs to £67 14s. 6d.
The proportion of wages to total operating costs for the
six-wheeler amounts to 15.33 per cent. at 44 hours, 20.41 per cent. at 55 hours and 24.17 per cent. at 66 hours.
Adopting the same procedure as before, standing costs per mile when averaging 800 miles per week would amount to 4.99d. at 44 hours, 5.98d. at 55 hours and 6.94d. at 66 hours. Similarly, at 1,000 mites per week, standing costs per mile would be 3.99d. (44 hours), 4.78d. (55 hours) and 5.55d. (66 hours). Adding these sums to the running costs per week ,of 13.38d. per mile for an 800-mile week, the total operating costs become 18.374. per mile when 44 hours are worked, 19.36d. at 55 hours and 20.32d. at 66 hours. At 1.000 miles per week the corresponding figures are I7.37d., 18.16d. and 18.93d. per mile.
Third Example
The third example is a I6-ton eight-wheeled articulated vehicle for which the total price is estimated to be £4,640. Licences will be reckoned to cost £2 10s. per week, the unladen weight being 71. tons. Wages will he in the next higher category (15-18 tons) -and total £10 5s. 2d. Rent and rates are assessed at 15s. and vehicle insurance at £2 2s. 5d, Interest will amount to £2 15s, 7d., giving a total standing cost per week of £18 8s. 2d, Based on an estimated fuel-consumption rate of 9 m.p.g., fuel cost per mile will amount to 5.11d. Lubricants are reckoned at 0.28d. per mile and tyres at 3.95d., assuming a mileage life of 30,000. Maintenance is placed at 3.01d. and depreciation at 3.31d. per mile. The total running cost per mile is 15.66d.
Corresponding running costs per 'Week will be: Fuel, £17 0s. 8d.; lubricants, 18s. 8d.; tyres, £13 3s. 4c1.; maintenance, £10 Os. 8d.; depreciation, £11 Os. 8d. Running costs thus total £52 4s. and operating costs £70 12s. 2d. per week, With wages increased to £13 9s. 3a. when 55 hours are worked, standing costs become £21 12s. 3d, and operating costs £73 16s. 3d. Similarly, when 66 hours are worked, Wages amount to £16 19s. 8d., standing costs to £25 2s. 8d. and . operating costs to £77 6s. 8d. per week. Wages equal 14.52 per cent. of operating costs at 44 hours, 18.24 per Cent. at 55 hours and 21.95 per tent. at 66 hours.
With an assumed weekly average mileage of800, the standing costs per mile would be 5.52d. at 44 hours; 6.48d. at .55 hours and 7.54d. at 66 hours. Where 1,000 miles per week are averaged, the standing costs per Mile would be 4.42d. at 44 hours, 5.18d, at 55 hours and -6.03d. at 66 hours.
Total operating costs per mile at800 miles per week would he 21.18d. for 44 hours, 22.14d. for .55 hours and 23.20d. for 66 hours; and at 1,000 miles per week; 20.08d. for 44 hours, 20.84d. for 55 hours and 21.69d. per mile for 66 hours.
It should be noted that the respective .operating costs per mile for these three vehicles have been calculated on the assumption that the whole of the standing costs will be spread over 44 hours, 55 hours and 66 hours. This is in contrast to originally calculated costs on the basis of a 44-hour week, with only overtime wage rates to be met after the standard week had been worked. In individual circumstances, the objective would be to' determine what in fact was likely to be an average working week, and to calculate costs and charges accordingly.
Despite the substantial increases of £3 4s. Id. and £6 14s. 6d. payable in respect of wages when the driver of the eight-wheeler works 55. hours and 66
hours respectively, the reduction in total operating cost is even greater when higher weekly mileages are averaged. Thus, the cost per mile at 800 miles per week rises from 21.18d. to 22.14d, when the number of hours increases from 44 to 55.
When 1,000 miles per week are averaged, however, the costper mile is reduced to 20.08d. at 44 hours and 20.84d, at 55 hours. Only when 66. hours are worked is the cost per mile(21.69d.) higher than when 800 miles are averaged in 44 hours.
Correspondingly, the operating cost of the 7-toner whenaveraging 1,000 miles per week is 14,02d., on the basis of a 55-hour week. This is increased to 14.81d, per mile if 66 hours are reqUired to complete the week's work. Even so, this is lower than the cost when only .800 miles per -week are covered, whether, 55 or 66 hours are worked-.
The difference in the total operating cost of the 'rigid six. wheeler when the number of hours 'worked is increased from 44 to 55 amounts to 0.79d. per mile, whilst the corresponding increase from 55 to 66 hours is nearly the same at 0.77d. It is significant that despite the increased cost to the operator, the reduction in operating cost when the vehicle is more fully, 'employed results in a greater cut in the total operating cost;
Thus,. rhen 800 miles per week are averaged in 44 hours, the operating cost per mile is 18.374. which is reduced by exactly Id. to 17.37d. at 1,000 miles per week. When 66 hours are worked, the rethiction is even greater, namely 1.39d. per mile, Therefore, provided that the extra cost of overtime working is allied to increased productivity resulting in higher mileages and tonnages, maximum employment of vehicles will prove economic. Conversely, increased overtime incurred solely by non-productive delays can have disastrous effects on operating costs and subsequent revenue.-S.B.