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£2 12s. Per Ton to Cover Costs

28th December 1956
Page 53
Page 53, 28th December 1956 — £2 12s. Per Ton to Cover Costs
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Which of the following most accurately describes the problem?

IN my previous article it was shown that the prospect of meeting the fuel cuts by reducing the number of working vehicles and spreading the ration over two vehicles out of a fleet of five would not be practical. The fixed costs of the three idle lorries would still have to be met and the.. expense of so doing would be too heavy. Now I propose to consider another solution namely that the co-operation of, the customer should be sought and the extra cost put on to the

rates: .

The proposition I have in mind provides for the operation of two of the five lorries, and the transference of the expenditure involved in standing three vehicles off being added to the rates. In normal times each of the five vehicles was engaged in long-distance haulage. averaging 800 miles per week. The traffic was fairly even, allowing for an average of 8 tons on the outward journeys and 5 tons for return loads.

The article showed that the cost of operation of the five vehicles running 800 miles per week each totalled £56 10s. per vehicle per week. The tonnage carried per vehicle per week was 26. The revenue totalled £65 per week, so that it is fair to state that the operations were satisfactory so far as profitable earnings were concerned.

Back to Normal

Now suppose that this operator, in order to be able to run economically, decides to lay off three Of his five vehicles and continues-to run two vehicles only. He decides that it would be wise for him to do his best for his customer in the hope that rationing will shortly be unnecessary, and he will quickly be back to normal. He takes the view that, if he does help his customer, the latter will reciprocate by returning traffic to him when rationing ceases.

In this way, he thinks, he will be able to retain that measure of the goodwill he has so justly earned with his five vehicles. With that object in view he decides to lay off three of his fleet and make do with the other two. He calculates that if -he puts the whole of his ration into two vehicles he will be able to keep his customer happy even at the risk of having to operate the two vehicles at a slight financial loss.

Let us see what can be done along these lines. The problem is to discover whether his fleet can stand the loss of three vehicles but still earn a profit. I should begin with the running costs, as they are affected only by the rise in the cost of fuel. The other costs. will remain substantially the same as before. The items arc: fuel, reckoning upon 15 m.p.g. and 5s. 3d. per gal.. 4.2d. per mile;-lubricants, 0.25d.; tyres, 2d. (account has been taken of the recent rise of 10 per cent. in tyre prices); maintenance, 2.10d.; and depreciation, 3.45d. The Iota! is Is. per mile.

The fixed costs require some close investigation. The expenditure on taxation will be unaffected; it will reniain as before at £1 8s. There will be no tax on the idle vehicles. These are kept in the garage and the opportunity is taken to overhaul them while they are off the active list. Garage rent for the five lorries will amount to £1 10s. per week. Insurance, including provision at a reduced rate, £1 5s.; interest on capital outlay on the five vehicles, £9 10s. Total, without reference to wages, £13 13s.

Drivers' Wages

Wages call for a rather extensive investigation. The net figure. the wages of a driver working for an operator whose headquarters are in a group I area, is £7 I4s. Then there is overtime to be considered: a vehicle cannot cover 800 miles per week in two journeys without a large sum being due for overtime. In a case I have before me at the moment the weekly overtime is 16 hours and the amount of the driver's wages is 11 1 12s. 9d. net. -Provision for hOlidavs will be approximately I Is. per week: National Insurance premiums, 6s. per week; and employees' liability, 3s. Total of wages and allowances is £12 12s. 9d.

But that is not all. There is still something to be said about the wages of the three drivers for whom there is, at the moment, no work. I am going to presume that the operator prefers to keep them in work, hoping that the stand-off period will he shot. They will under those conditions be paid the basic wage of £7 I4s., to which must be added lls. for holiday pay and 8s. for employees' insurance, say £1 per week. There are three men to whom this applies, and the total per week paid to each will be £8 14s.

The grand total of payments is roughly £56. Add the running costs, Is. per mile for 1,600 miles, £80, and the total cost for the five vehicles (two active and three nonoperating) amounts to approximately £136. That is for a tonnage of only 52 over a 200-mile route. The net cost per ton, making no provision for establishing costs or profit, is close on £2 12s. per ton. It would remain for the operator to prove to his customer that such a rate was justified, in an, endeavour to obtain subsistence payment. S.T.R.


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