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the costing column

13th February 1970
Page 51
Page 51, 13th February 1970 — the costing column
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Which of the following most accurately describes the problem?

Estimate now: adjust later

• Despite good intentions a newcomer to commercial vehicle costing can get the whole subject out of perspective from the outset. Confronted by pages of figures such as appear in the Commercial Motor Tables of Operating

Costs he could assume wrongly—that it was largely an arithmetical exercise, with an allied misconception that there was only one correct answer and all others were incorrect.

This is not so. Any set of operating costs are i-nevitably a combination of actual costs and estimated costs. However much even an experienced road transport operator strives to raise the accuracy of the estimated portion of his operating costs, he can never reach a state of finality in such calculations.

For example, to calculate depreciation costs on a mileage basis one must obviously "know" the mileage life of the vehicle concerned. Even , given the most favourable conditions for ' making such a calculation, namely where an operator already has similar vehicles in his fleet the selected figure must invariably be an estimate. If he were to wait until the figure of actual mileage life was available (i.e. when the vehicle had reached the end of its economic life) the resulting operating costs which could then be calculated would be of academic interest only. To mention only one aspect, opportunities for increased efficiency which earlier calculation of costs could have provided would have been lost.

Therefore, first principles for road transport operators undertaking costing for the first time should be keep it simple but up to date: reasonably accurate recordings of last week's operations are far more valuable than complex records compiled too late to serve a practical purpose.

To achieve these principles a sense of proportion needs to be exercised. Complete accuracy is to be commended. The practice of using estimates, will not only remain but will apply to a larger proportion of calculations than might first be supposed.

The amount of excise duty currently payable on any particular type of commercial vehicle is known precisely, as are the additional amounts for carriers or operators licences.

For the short term it would be correct to treat these as fixed costs.

When, however quoting for a long-term contract the trend in higher licence duty in recent years would have to be examined and a possible estimate made as to the future trend.

The operator with only limited time to devote to costing should base his estimates on such sound information as is readily available. Absolute accuracy is unobtainable, however painstaking the effort.


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