Planning for Profit
Page 74
Page 77
If you've noticed an error in this article please click here to report it so we can fix it.
The Missing Factor
The Omission of Any Reference to the Likely Average Weekly Mileage in Readers' Requests for Recommended Costs Could Lead to Serious Undercharging
ARECENT inquiry concerned the cost of delivering approximately 100 parcels on a 7-ton oiler over a lead of 135 miles, averaging three days per return load. As so often occurs in this type of inquiry, no mention was made of the anticipated weekly or yearly mileage, and the reply provides an opportunity to emphasize the significance of this factor.
Dealing first with the standing costs of this particular type of vehicle, an unladen weight of 3 ton5 4 cwt. would incur an annual licence duty of £38 15s. This would be equivalent to 15s. 6d. a week, on the basis of a 50-week year to allow for two weeks when the vehicle may be off the road for either major repairs or driver's holidays.
Wages are estimated to cost £9 Ills, 6d., inclusive of allowances for holidays with pay, National and employers' voluntary insurance contributions. Rent and rates for garaging the vehicle are reckoned al I Is. 9d. a week. With an annual premium amounting to £43, the standing cost per week for insurance is 17s. 2d.
With an initial outlay on the vehicle of £1,525, interest charged at a nominal rate of 3 per cent, would add 18s. 3d., making a total for these five items of standing costs of £12 14s. 2d. a week. Based on a 44-hour week; this will be equivalent to 5s. 9,1c1. an hour.
Assuming fuel oil is purchased in bulk at 3s. 'Old. a gallon and a rate of consumption of 15 m.p.g. is maintained, fuel cost per mile would amount to 3.12d. Lubricants are assessed at 0.25d. With a set of tyres costing around £185, tyre cost per mile will be 1.49d., when the mileage life per set amounted-to 30,000. Maintenance, inclusive of washing and servicing, will be initiatly assessed at 2.34d. a mile.
To obtain the balance on which to calculate depreciation, the cost of the original set of tyres is first deducted from the initial price of the vehicle. A further deduction is then made in respect of the estimated residual value, leaving in this instance a balance of £1,170. Assuming a vehicle mileage life rs40 of 150,000, the depreciation cost per mile would be 1.E giving a total running cost per mile of 9.07d.
We will now apply these results to the operation cited in inquiry. Assuming that the mileage of 135 does, in fact, re sent a single journey, and that other work is undertaken the remaining three days, involving a similar mileage, the t mileage for the week would then be 540.
At the cost per mile of 9.07d. just obtained, the runt costs per week would then amount to £20 8s. 2d. To this n be added the standing costs per week of £12 14s. 2d, givir total operating cost per week of £33 2s. 4d. In that event proportion attributable to three days' parcel delivery wc be £16 1 ls. 2d.
The amounts so far given, however, relate only to the ac costs to operator. To formulate charges, additions have tc made for overhead costs and profit margins. Allowing for increase of 20 per cent, in each instance, the total addi would amount to £6 12s. 6d., resulting in a total charge for three days' work of £23 3s. 8d.
Adjusting Costs
If, however, the assumption that other work would be fo for the remaining three days was incorrect, then the costs recommended charge for effecting the 100 deliveries ove return mileage of 270 each week would have to be adju: as follows. The standing costs per week would remair £12 14s. 2d., but will now have to be charged solely to parcels delivery work.
Total mileage for the week now being 270, the resul running cost per week will be reduced to £10 4s. id. total would apply only if the running cost per mile remai at 9.07d. If maintenance or depreciation costs were incree because of the low weekly mileage these amounts might hay, be increased 'proportionally.) On the basis of this lower mileage the total operating per week now becomes £22 18s. 3d. and, making similar al tions as before for overhead costs and profit margins, the m mum recommended charge would then be £32 Is. 7d.
Increase on Charge
This increase of £8 175. 11d, on the previous recommen charge emphasizes the importance of assessing what the aver weekly mileage is likely to be. Particularly where new w has been undertaken it may well be difficult to make such estimate. But, as this example shows, some assessments rr be made if unprofitable quotations are to be avoided.
"W HAT brakes are required on a trailer?" asked anot reader. In accordance with Section 55 of the Mc Vehicles (Construction and Use) Regulations, 1955, ev trailer exceeding 2 cwt. unladen must have an efficient brak system capable of being applied whilst it is being drawn. Wh a trailer has not more than four wheels the braking system ni be applicable to at least two wheels. Alternatively, when trailer itself has more than four wheels the braking sys1 must be capable of being applied to at least four of those whe
With the exemption of some special ?es of vehicles and trailers not exceed; 1 ton unladen, braking systems must so arranged that they can be applied her by the driver or some other person either the vehicle or the trailer.
In addition to the, requirements whilst e trailer is being drawn, the braking ;tern of all trailers exceeding 2 cwt. laden must be so arranged to act as parking brake to prevent at least two the wheels from revolving, whether the [der is attached to the towing vehicle not.
Where, however, a trailer forms part an articulated vehicle and is perinently attached, the brakes must ectivety prevent at least two of the wheels from revolving ten the trailer is not being drawn. In this context " per inently attached" means that the trailer can be separated )m the towing vehicle by the use of facilities normally found ly in a workshop.
A further requirement is that brakes on trailers must not rendered ineffective by the non-rotation of the engine of e towing vehicle. This, however, does not apply to any Liters still operating which were built before April 1, 1938.
NEWCOMER to the haulage business asks for advice on L. the likely costs of operating a 3-ton goods vehicle, with her petrol or oil engine, alternatively 400 and 600 miles a e
Adopting the same procedure as in the previous costing, unladen weight, with petrol engine, will be around 2 tons cwt., with a resulting annual licence duty of £27 10s., the uivalent of Ils, per week. Wages will now amount to 4s. 3d, a week, inclusive of similar allowances as before. !tit and rates are assessed at 9s. 9d. and insurance at 9s. 7d, a ,ek, Interest charges on an initial outlay of £870 would be s. 5d. giving a total standing cost per week of 111 5s, With petrol at 3s. 10d. a gallon and a rate of consumption 15 m.p.g., fuel cost per mile will be 3.07d. Lubricants are -:koned at 0.21d. and tyres at 0.74d., still assuming a mileage e of 30,000.
At 600 miles a week maintenance is assessed at 1.68d. a le, but at 400 miles a week this will be increased to 1.83d. the assumption that some of the tasks will be performed !ekly, rather than on a mileage basis.
Adopting the same procedure as before, the depreciation costs r mile will amount to 1.09d. This gives a total running cost r mile, at 400 miles a week, of 6.94d. It amounts to 6.79d. at 0 miles per week.
The addition of standing and running costs gives a total operating cost of 1169d at 400 miles a week, and 11,29d. at 600 mites per week.
Because of the slightly increased weight of the 3-ton oiler, the cost of licence duty per week will now be 12s., but wages, rent and rates and insurance remain the same. With a higher initial outlay of £995, interest per week now amounts to 12s., resulting in a total standing cost per week of £11 7s. 7d.
With a 50 per cent, improvement in fuel consumption, fuel cost per mile becomes 2.08d., and lubricants are reckoned at 0,23d. per mile. Tyres remain the same at 0.74d. but maintenance is reduced to 1.46d. at 600 miles a week and 1.60d. at 400 miles a week.
Again because of a higher initial outlay, depreciation is increased to 1.26d. a mite, giving a total running cost per mile for the 3-ton oiler at 5.91d. at 400 miles a. week, and 5.77d. at 600 miles a week. Correspondingly, the total operating costs per mile become 12.74d. at 400 miles a week and 10.32d. at 600 miles a week, in both instances showing savings over the petrol-engined version.
"IS there any restriction on the extent to which a driver may reverse a vehicle? " inquires an ancillary user.
No legal limitation is, in fact, specified. Section 87 of the Motor Vehicles (Construction and Use) Regulations, 1955, does, however,. stipulate that, except in the case of road rollers or other road plant actually engaged on road. construction or repairs, no one may reverse a vehicle for a greater distance or time than may he requisite for the safety, or reasonable convenience, of the occupants of that vehicle, or of other traffic on the road.
With the advent of the Motorways Traffic Regulations, 1959, however, there is now a further stipulation that no vehicle Must be driven or moved backwards on a motorway except in so far as it is necessary to back a vehicle to enable it to proceed 'forward along the motorway, or to be connected to another vehicle. S. B.