COSTING PARADOX DISPUTED
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IMET a man, the other day, who had the temerity to suggest that he did not agree with my " Paradox in Costing," which was the subject of the article in this series three weeks ago. In that article, I pointed out that accurate figures for the maintenance of a particular vehicle are unattainable until the machine has been discarded, by which time the vehicle is probably out of date and the information is not of much value.
To state that this critic disagreed with my thesis is, perhaps, going a little too far. What he did say was that those remarks, in his view, were addressed only to small operators with no experience.
"What makes you think that?" I asked.
"I have a definite and positive reason for thinking so," he replied, " in that it doesn't apply to me. I operate 60 vehicles and T know from the time when I purchase a vehicle what I.am going to spend on it in repairs and maintenance. What is more," he continued, "in my opinion, the figures, quoted in The Commercial Motor Tables of Operating Costs for maintenance are insufficient."
" Do you mind if I take one thing at a time?" !` Not at all," said he.
"Then I will assert that not only you, but othe.rs with bigger fleets and possibly greater experience, cannot accurately forecast the cost of maintenance of their vehicles. To show you how, in one way at least, you may make a serious mistake in an estimate, I will repeat to you a warning which was recently given in any hearing at a big meeting of operators, when one of those present, himself an owner of a large fleet and -a man of many years of experience, pointed to the folly of relying on past records of maintenance in their application to new vehicles, even those which appeared to be of the same make and type. Changes in design brought about sometimes by alterations of personnel in the management of the manufacturing concern might seriously affect the accuracy of those estimates.
" Now, your position is neither better nor worse than that of any other operator and neither you nor anyone else can accurately foretell hismaintenance costs. I agree that it is possible to budget ahead and that the more experienced the operator the more likely he is to be able to keep within his budget, but neither a budget .nor an estimate is a statement of actual expenditure : there are usually wide differences between them.
" And now let us turn to the more important matter of your own costs. You say you think the maintenance figures in our Tables are insufficient."
"I do, definitely. My vehicles weigh 21 cwt. mi. laden, so I assume that it would be near enough if I call them 1-tonners. The figures for maintenance for a 1-tonner in the Tables is 0.50d. per mile and . . ."
"But wait a minute," I interrupted, "surely you don't think that the classification of types and sizes of vehicle in the Tables is according to unladen weight? " " Of course, I do ; isn't that correct? "
" It certainly is not correct. Just think for a minute. Where are you going to buy a vehicle weighing 8 tons unladen, unless you have one specially built? What do you think the Tables mean by 12-ton six-wheelers," said I, turning over to the table in which that size of vehicle is included., He looked over the table with me and exclaimed : " Well I never! You know, I have never been beyond the first few columns, in which I thought I had found figures relating to my own vehicles, most of which are of 2-ton load capacity."
" No wonder, you. thought The Commercial Motor allowance for maintenance was insufficient," I rejoined. " You see, for a 2-tonner the figure is actually 0.70d.
per mile. Further, as has often been explained in connection with these Tables, the figures quoted are averages and are likely to be exceeded or improved upon, according to conditions. Now, your work it was house-to-house collection and delivery) is what I call a strenuous occupation for motor vehicles.
" There is hardly a component of the chassis which does not have to work harder in that class of service than in any other road work. If I had been asked to estimate the maintenance cost of 2-tonners employed on local collection and delivery, I should have said that it wonld be likely to be 50 per cent. above the average and I should thus have taken at least id. -per mile."
" Well, of cour§e, that's quite a different story. I would, nevertheless, like to have a word or two with you about the assessment of maintenance in the case of an establishment like mine, which boasts a separate department for maintenance and repairs."
We then went into a committee of ways and means, and discussed his methods of costing, particularly in respect of depreciation. For obvious reasons I cannot set down all that was disclosed. Some of the points, however, I can discuss with advantage.
"I have, as you see," he said, pointing to particular columns of his accounts, " 10 items which I debit to maintenance. They are; (1) Running repairs ; (2) a general overhaul every 30,000 miles ; (3) washing ; (1)
painting (one complete repaint, two touch-ups and varnish every three years) ; (5) spare vehicles (10 per cent. ratio) ; (0) upkeep of workshops; (7) upkeep of garages; (8) insurance of premises; (9) heating, lighting and power ; (10) management expenses.
" Is your figure designed to cover these costs and, if not, what provision is made for that expenditure?" " Some of the items," I replied, " cannot fairly be included. Any system of costing must be such as to enable, so far as possible, the actual expenditure on each vehicle to be segregated.
" Following that, then," I continued, " item No. 5— ' cost of spare vehicles '—must come out."
",But what shall I do with it? "
" I'll come to that in a minute. At least you must admit that it has nothing to do with the actual cost of operation of any vehicle other than itself.• • You mean the cost of the spare vehicle mustn't be debited to any of the others? "
" Exactly. In the same way, item No. 7—' upkeep of garages '—is not maintenance. Any expenditure under that heading must go down as garage rent and rates or its equivalent. By the way, are your garage and repair shops in the same building?"
"Yes and no," came the reply. "The fleet is scattered and, whilst most of them are garaged elsewhere, those for the depot located near the maintenance department are garaged under the same roof."
" I see. That does rather complicate matters, because for the exact costing of individual, vehicles it involves splitting your expenditure on that particular building in proportion to the floor areas set apart for garage and for workshops. That condition applies also
to items 8, 9 and 10.". S.T.R.