More About Country Costs
Page 54
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"The Commercial Motor "'Costs Expert Deals with Some Interesting Figures on Establishment Expenses Supplied to Him by a Rural Haulier, and Explains How to Allot Them Among Various Vehicles in a Fleet According to their Respective Payload Capacities
ALETTER which I have redbived concerning the articles in which I ant comparing costs of operation in rural areas with those for London and with average data, comes from a rural haulier concerned mainly with the conveyance of agricultural produce and livestock. He sends me some establishment-cost figures from his own books and invites comparison between these and those which appeared in the previous article.
It should be remembered that I wrote those articles to demonstrate that rates, as long as they are based on cost . plus profit, cannot be standardized so as to apply with equal fairness throughout the country. In the summary of ccists I showed that, taking average rates as 100 per cent, rural rates should be 82 per cent. and rates in London about 107 per cent. The actual figures for the particular case with which I dealt, the use of 5-ton lorries running 500 miles per week, each carrying 50 tons, were: average, 18s. 10cL per ton; rural, 16s. 6c1.; and London, £1. I pointed out that an operator in a rural area, using an oil-engined vehicle, could offer to charge as little as 12s. 9d. per ton and should still make a minimum profit of 20 per cent on cost.
This particular correspondent tells me that his traffic seems to include everything from seed 'potatoes to livestock—at least he mentions coal, feeding stuffs, hay, straw and livestock. He tells me in his letter that he operates three vehicles, a long-wheelbase 5-torincr, a long-wheelbase 2tonner and a 30-cwt. tipper. "In addition," he continues in his letter, "I have three livestock containers, one for each lorry, for which I charge 7s. 6d. for loading, unloading and washing." , s. ' Readers who are not acquainted with the details of livestock conveyance might like to be informed that there is a regulation which providep that livestock vehicles shall be thoroughly washed, cleansed and disinfected after each journey. It seems to me that 7s. 6d. per trip is hardly sufficient to cover the costs involved. However, we are not concerned with that matter in this article but with the helpful information which the writer sent about establishment costs. He tells me that the figures set out in the article relating to operators in rural areas do not apply to him with any exactitude.
Road Conditions
In the first place, he states that the roach in his par( of the country, Devon and Cornwall, are shocking. The main • road only is two-track, the secondary roads, which are those which he uses in the main, arc one-track wide with provision at intervals, for vehicles to pass. Other roads are little better than cart tracks.
"Moreover,' he goes on, "in a business like mine lorries are as often in the fields as on the' roads and it is quite common experience for the vehicle to be bogged for an hour or more, at the end of which time the farmer's tractor has to be sent for to haul it off the field and on to the road again."• He goes on to point out that these are experiences entirely outside the knowledge of the city haulier and it is quite certain that they accelerate the wear and tear of the machines and increase the cost of operation to such an extent as to make average figures, such as those in "The Commercial Motor "Tables of Operating Costs, inapplicable. He asks me,to make sonic suggestions as to what his charges should be.
He then turns to the question of establishment costs, as ,t36 regards which he apparently is of the opinion that there is ample margin in my figures. In the first place, he states that there is really no need to provide for the first five items—office rent, office rates, lighting and power, heating and water. He states that in his experience the expenditure is nil, but as a matter of courtesy rather than anything else he allows £5 per annum for the lot.
Telephone charges, for which I have allowed £16 per annum he sets down as £20. He accepts the amount I have put down for auditor's fees, but says that he has never had to spend anything on law costs and he has not yet had to consult a solicitor about his business (thtit seems to me hardly believable but we must let it pass). For the next item of " Sundries " he allows £1 per month, that is £12 per annum, as against my £15 10s. He insists that there is no need at all for the item, " Fines," as he has had no experience of ever having paid anything on that account; he says that the principle offence for which operators have to pay fines, exceeding the speed limit, is entirely out of the question on the roads he traverses with his vehicles.
Travelling Expenses
For travelling expenses, including the use of a car, for which I allowed only £53 per annum, he asks £150. Hellas no expenditure to meet in connection with clerical wages or for the National Insurance premiums relating to such employees; he does all his clerical work at home.
The next item, "management," is another about which he thinks my provision insufficient. He considers that he is worth at least £3 per week or £150 a year, as against my 9uotation of £120 per year. Regarding depreciation on garage fixtures, he writes that the only garage fixture he has is an old petrol pump which has long been written off the books, but as a matter Of accountancy he is willing to allow £2. He'pays nothing for subscriptions to associations. Bank charges he puts at £8 as against my £6 10s. He says there is nothing in the way of expenditure on ferries, weighing bridges and parking, nor any amount to be included for interest on hire purchase as he pays cash for his vehicles. •
As regards printing and stationery, he writes that he is still using a rough notebook which he bought some years ago for 6d., and he does not think it necessary to put that 6d. down as an eStablishrnent cost. There is no expenditure on insurance of buildings, but £8 per annum on the maintenance of those buildings. He has never had any bad debts or claims. His figure for interest on capital outlay is £20 per annum, postage costs him £10 per annum and his A and B licences /5. The total is £445 per annum, which is not, after all, so Much different from my figures in the articles to which I have. referred.
" If I allow equal amounts for the three vehicles, then the establishment costs per annum per vehicle come to approximately .£148 as compared with the £100 16s. 7d. quoted in Table II of the Article we are discussing," he says.
"Is there not some mistake," he writes, " as it hardly seems likely that a man in a small way • of business like myself should be involved in establishment costs of £148 per annum per vehicle, nearly £3 per week? I would be glad if you would deal with this aspect of the matter." The first thing I had to state in response to his request was that he was mistaken in his method of spreading the establishment costs over his three vehicles. The machines differed in size and the allocation of establishment costs should differ accordingly.