COSTING A LA E DAIRY FLEET
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A Survey of Pre-ti,ar and Pres' ent Motor Costing, as applied to the Fleet of Manorcroft Dairies, Ltd.
By'
Lewis Jones
(Cost Accountant to the Company)
THIS snrvey of motor costing was made for two purposes. First, to find the increased cost of operation due to war conditions, and, secondly, to bring out basic principles underlying the operation of motor vehicles, from the angle of cost of working.
Manorcroft Dairies, Ltd., of Dewsbury, has had in operation for the past two years a costing system for its vehicles in which it has kept a monthly cost sheet for each lorry and car, and recorded thereon the main items necessary for motor costing. These include the mileage covered, the petrol and oil used, and details of repairs carried out.
In the two years Under survey, the concern has operated 14 commercial vehicles, as well as. four motorcars, but, owing to the necessity of economy brought about by the war, the fleet had been reduced to nine lorries by October, 1940.
The commercial vehicles operate for two main purposes: (a) the collection of milk from farms; (b) the delivery of milk to shops, canteens, bakeries, etc., in a 30-mile radius
On the collection runs, lorries of large carrying space are necessary, and to obtain this space the vehicles have to be of the 4-6-ton class, although the load does not approach these figures in actual weight. The mileage of these wagons is in the neighbourhoodof 800 per vveek,'and although they have often to traverse narrow and bad roads in outlying districts, the work in general is not so heavy as experienced in ordinary haulage.
On the distribution side, lorries of up to 2 tons carrying capacity are used, and the weekly mileage is about 400. Not many of the calls are near together, as the company does not supply household or retail milk, and the road bulk carried approaches wagon. capacity. It was found in the survey that there was a tendency to overload the smaller vehicles, and this was accompanied by increased cost. In order to make the survey comprehensive, it was found necessary to review the whble of the costs for the two years in which records had been kept, as the monthly' cost per mile fluctuated violently in accordance with the repair work carried out.
Makes and Types of Vehicle to Which Costs Apply Cost sheetsof the following vehicles were dealt with:Bedford, 8-cwt. van, 1937, 30-cwt., 1937; Ford, 1 ton, 1933, 8 h.p. car, 1937; Fordson, 2 ton,. 1933, 1935, 1937; Morris-Commercial, 30 cwt., 1935, 1939 (two), 3i tons, 1940, 6 tons, 1939 and 1940; Morris 8 h.p. car, 1935; Dodge, 2 tons, 1937, 4 tons, 1938; Austin 10 h.p. car; 1940; Sunbeam-Talbot 14 h.p. car, 1940.
Due to the similarity of types, an interesting study was promised, and in order to get over the influence of repairs in the monthly cost sheets, the figures for each vehicle had to be summarized in half-yearly sections. One advantage of doing this was that figures for each half-yearly period could be compared with-others for the same vehicle and with the half-yearly periods of other vehicles, and it was possible to see the trend of cost, and had reasons for variation.
PETROL COSTS.-Whilst, in general, it was seen that petrol costs varied least of all, it was noted that the same lorry could have vastly different consumption readings, according to the work upon which it was engaged. Shortjourney work gave increases in petrol consumption of as much as 30 per cent.
Wagons on milk-collection runs gave much better figures than those used on delivery work, with the exception of the 4-ton lorry, which proved heavy in petrol consumption at all times.
The following average figures were noted:Milk-collection runs:-3-4-ton lorries, 12 m.p..g.; 5-6-ton lorries, 11 mpg.
Delivery wagons:-8-cwt. van, 20 m.p.g.; 1-ton lorry, 14 m.p.g.; 30-cwt. lorry, 12i. m.p.g.; 2-ton lorry, 14 m.p.g. Cars:-8 h.p., 35 m.p.g.; 10 h.p., 34 m.p.g.; 14 h.p,, 22i m.p.g. OIL COSTS.-The vehicles appeared. to 'differ considerably as to their oil consumption, not so mach as between types, as with age and condition, of the vehides. The new lorries showed readings up to 2,409 m.p.g., but figures as low as 600 .m.p.g. were recorded on the older vehicles. In the case Of one lorry, known to have an engine in bad condition, a figure of' 350 mpg. was returned; 1,000 m.p.g. appeared to be an average figure for the fleet, and, with oil at 4s. per gallon, gave a cost of approximately .084. per mile.
TYRE COSTS.—In the cost sheets seen, tyres had been charged to the vehicles at the time of fitting, but these figures were ignored, as they obviously had no relation to actual tyre costs per mile. The speedometer reading at the time of tyre fitting was noted, in order to calculate tyre life.
Contrary to expectations, the life of tyres was found to be better on the heavier class of lorry. One 6-tonner did 40,000 miles without a change being made. Another of the same class has done 29,000 on the original set to the date of survey. " The 8-cwt. van wore out a set of covers in 15,000 miles, This was one of the vehicles found to be overloaded.
The 1939 Morris-Commercial lorries have covered 18,000 miles to date, and show little signs of tyre wear, and a mileage of 30,000 is promised.
Influence of Driving Methods Upon Tyre Costs
A difference in driving methods was apparent from the car records. The 10 h.p. car is a popular type designed for average use, and has covered 10,000 miles without any appreciable sign of tyre wear. On the other hand, the 14 h.p. car, which is a sports model of high speed and quick acceleration, has worn out its original covers in the „same distance.
A figure of 30,000 miles seems reasonable for the lorries in general, and 20,6030 for a car or light van. Tyres of the former cost anything up to fib each, and for the latter approximately £2 10s. each. , The following table is based on this information :— Cars or 8-cwt. van, .12d. per mile; 30-40-cwt. lorry, .20d. per mile; 4-6-ton lorry, .36d. per mile; 4-6-ton six-wheeler, .50d. per mile.
Approximately 40 per cent. is added for six-wheeled vehicles, as against four-wheelers.
REPAIR COTS.—rt would appear from the cost sheets that a certain amount of repair work is necessary, even on new vehicles, presumably in the form of maintenance, and this in itself is assessed at .10d. per mile, irrespective of type.
It can safely be assumed that wear and tear of the mechanical parts of a motor vehicle are taking place throughout its life. In the early days it is not necessary to make good such wear, but in the later periods an accumulation has to be dealt with. The cost sheets under review bore out this assumption, and it was very noticeable that the repair cost per mile increased with the age of the vehicle.
After 50,000 miles it appeared that replacements in general became necessary, and with vehicles of three to five years old the castings were particularly heavy. The Bedford van showed figures of .26, .68, .77 and 2.00d. per mile in the four half-yearly periods under review.
A 6-ton lorry, bought in the second half-year and sold in the fourth, showed figures of .02, .35 and .66d. per mile.
The 1939 lorries (30-cwt.) gave these results: No. 1, .12 and .35d. per mile; No. 2, .13 and .44d. per mile.
The 1935 lorry of the same capacity proved much more costly to maintain, the figures being .78, .82, , 1.16 and -1.45d. per mile.
The 2-ton lorries, of which there were 'four, showed similar rising costs with age, figures as low as .384. per mile being recorded against the modern vehicles in their first year and figures as high as 1.50d. per mile for the older vehicles.
An average figure of .'57d. per mile was arrived at. This figure may be considered favourable, but it must be remembered that the fleet included .nine recently made vehicles.
The following figures are submitted as averages for vehicles with between 20,000 and 50,000 miles to their credit:— Cost per Cost 10,000 miles. per mile,
STANDING COSTS.—In addition to the above running costs of petrol, oil, tyres and repairs, which can be taken as more or less regular with the mileage, there are standing charges in motor-vehicle operation which are best assessed in cost per working hour. These charges comprise depreciation, interest on capital, tax, insurance,
wages and supervision. .
DEPRECIATION.—There are several ways of treating depreciation, but in this survey the practical method of writing off the initial cost over the period of life was used. It was assumed that the vehicles had a useful working life of five years and that at the end of that time there would be a scrap value equivalent to one year's debit, so that the capital cost was divided by six to get each year's proportion. INTEREST ON CAPITAL—Interest at the rate of 5 per cent. on the investment was allowed.
INSURANCE.—The fleet was insured under a comprehensive fleet policy, which ensured the maximum of benefit at the minimum of cost.
TAXATION.—The vehicles were run on yearly licenses at the usual rates.
WAGES.—On the collection wagons it was found necessary to have a youth to assist the driver with the loading and unloading of the lorries, and the cost per hour of service before the war was 2s. A change in general conditions, as well as compulsory wages: increases, has brought the cost per service hour up to 2s. 8d.. by October this. year. On the distribution side, the drivers can do their work
without assistance, and the pre-war cost per working hour was approximately is. 5cl. Wages increases have brought the cost up to is. 7-id. per working hour at the date of survey.
The average number of miles per hour covered by the milk-collection lorries was found to be 16, and roughly half this for the distribution wagons.
So that the cost per mile in wages was calculated at:—
Pre-war. October, 1940.
d. d.
Milk collection ... 1.50 2.00 Distribution ... • ... 2.12 2.40 SUPERVISION AND ADMINISTRATION.—It was found in this survey that in order to get the best service out of a fleet such as this it was necessary to employ a traffic manager and to maintain a repair shed for the lighter jobs.
The company tried for some time to do its own repair work, hut eventually concluded that it was best to entrust the heavier jobs to a commercial garage. On the other hand, work such as greasing, changing springs and minor repairs could be cheaply carried out at home. This repair shed, however, has to be maintained with equipment, spares, tools, light, heat, etc. .
The company uses Servis recorders on all its commercial vehicles (a source of valuable information), and the cost of these is included in this heading. Then, again, log sheets, petrol records and, other forms of stationery are required ; there is also a certain amount of clerical work and the use of office space and equipment and telephones. These expenses, althOugh attributable to the motor department, cannot be directly charged to the vehicles and were assessed on the mileage covered by the fleet. It. was found that a universal charge of .60d. per mile was reasonable for supervision, administration, etc.
WORKING HOURS.—It was found in practice that it was safe to use the figure of 2,400 working hours per annum, or 200 hours per month. This also made the cost per hour of standing charges easy to ascertain, as the yearly cost in pounds divided by 10 gave the cost per hour in pence.
STANDING COSTS PER MILE.—Using the figure of 200 working hours per month and the actual monthly mileage, the cost of standing expenses per mile can be calculated. It is noticeablre, of course, that this expense is reduced where the mileage is high, and vice versa.
(1) The cost tables appended give a summary of the costs per mile of operation, as brought out by this survey. It will be noticed that there is an increased operating cost of, roughly, 29 per cent., due to war conditions. (2) The standing charges per hour make it necessary that motor vehicles should work for the maximum 'number of hours per week. (3) Where possible, new Or nearly new vehicles should be employed to minimize the repair cost per mile. ,
(4) Vehicles which have covered over 50,000 miles can be maintained in service only at a cost of over id. d mile for repairs.
(5) The initial capital cost, together with interest, should be written off in equal amounts per annum, as if the yearly charge represented the repayment of a loan. If a sinking fund be utilized, at the time of sale there will be cash available for the purchase of a new wagon.
(6) Overloading and speed give rise to greater cost in petrol, tyres and repairs.
(7) In order to prepare accurate costs, regular daily entries must be made of mileage, petrol and oil, and other details.
(8) The principle of " averages tell results " is best adopted in motor costing, and costs over a period give fairest results.
(9) In calculating the cost of any journey the running. cost per mile should be multiplied by the miles run, and to this should be added, the standing cost per hour for every hour taken.
(10) There is a tendency for costs to increase, -and advances in the price of petrol have considerable bearing ort the cost per Mile.