Q What factors govern the amount of
Page 59
If you've noticed an error in this article please click here to report it so we can fix it.
depreciation that should be allowed in commercial vehicle costing and what is a realistic rate of interest on the capital outlay?
A The factors governing the amount of depreciation to be charged in commercial vehicle costing include not only the more obvious ones as to the type and quality of the vehicle and the severity of operational conditions. Other factors are the extent of maintenance facilities available, the urgency of the traffic carried and the competitiveness of the industry in which the vehicle is ernployed. Because of the latter factors obsolescence may need to be allowed for in addition to physical depreciation of the vehicle itself.
For the purpose of compiling the CM Tables of Operating Costs depreciation is calculated on a mileage basis ranging from 75,000 to 300,000 according to the type of vehicle it concerned.
For calculation of interest a realistic figure is considered to be around 1+ per cent more than the current Bank rate. When the Tables were compiled the current rate was then 5 per cent, so giving a total of 7+ per cent.