the costing column
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More miles, less cost
• Operating costs can be divided several ways — confusingly so for the newcomer to commercial vehicle costing. One such division is into standing costs and running costs.
The division is fundamental to the basic principle of costing. Those costs which arise whether the vehicle is being operated or not are termed "standingcosts. Those which are incurred only when the vehicle is operated are termed -runningcosts.
An all-important factor arises from this basic division. The lower the mileage run the higher the cost per mile. Conversely, the higher the mileage the lower the cost per mile. For example, the operating cost per mile for a 5-ton platform lorry decreases as the average weekly mileage increases as follows: 400 miles 14.96p; 600 miles 11 .64p.
These diminishing amounts arise because the total standing cost per week (E38.45 in this case) is being divided by increasing larger mileages. In practical terms, more use is being made of the vehicle.
However, closely allied to this basic division of operating costs into standing costs and running costs, is the problem of the time factor. For the newcomer to costing it can indeed seem a problem when, at one and the same time, an operator has to grapple with costs applicable to past, present and future operation.
Three-way division
The need for this three-way division on a time scale can arise for various reasons. First --and this should always be the prime consideration — the reason for the particular costing exercise. A vehicle which previously was proving expensive to run may have received attention in the hopes of remedying the situation. Immediately it is back on the road the operator will want to know as soon as is reasonably possible whether the desired improvement has been achieved. So he will examine the current engineering and cost records. In a strictly literal sense all records are 'past' records. But in everyday usage the most recent returns are commonly referred to as "current" records.) If, however, the operator was concerned with the long-term performance of a vehicle to the point at which he would have to replace it then he would need to examine his records over a much longer period. This assessment would normally be undertaken before acquiring the vehicle. Indeed, it should be one of the main factors to be determined before any decision is made as to vehicle replacement.
At the same time, however, as the cost of past operation by existing vehicles over a relatively long period are being examined the operator will inevitably be concerned with what his new vehicle will cost to run in the future. Past records will, in effect, provide the basis for forecasting the likely costs in the future.