Costing for the Oiler
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1 DEVOTED most of my previous .article to describing a method of making provision for establishment costs and profits for those witlwul knowledge of what their establiShineot Costs actually wei4 I then showed how to asses the operating costs of a ve ele in a simplified manner avoiding the 'use of decimal poin s. So far as the standing charaes'werecancerned, I comple ed my estimate in relation to a petrol-mined 5-tanner ca rying 6-ton loads. They were set our in that article an arc repeated here as in Table .I.
I also dealt with four out of five running costs and
discovered that the cost of and lubricants would amount to 40. . net-rnile.;;-fri-011. aracl, depreciation ld. Only maintenance --Wa'S 1.&ff:ittil,'ot 'eoiirie; that is the most difficult itein 'Of a.117•Litearnae•ther -Cad be a :wide' variation between; the ainount ',whichbrie operator willspendon. this item, and the .expeases. of another. These difficialties. may be largelyrbecause,of differences .in the way in, which r the work is carried out and it is practically -impossible to get agieementits to what an average' all6Wance for *in-
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One highly experienced fleet owner Mid me that My figures• for maintenance vvere absurd and that I shonld:aisume 34: per 'Mile as the maintenance cost of alow-priced '5-tontier.: This would mean trilm, the -small.,bainier -running a vehicle of this. type .fo06,000 miles peir annum might expect to: spend £450 a year on ,rnaintenancle only Mar reluctance to fall in with that :stiggestion will be understoOd..
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Ample Allolvance
There, also cr./lies the suggestion •from, another operator _ that id., per inile is an aniple, allowance.' Both these, men speak' from 'experience and meati' what they say, So that ' to attenipt to placate either_ df them by splitting the difference would be 5 Waste-of tinte. Neither would accept lid. per mReas an' average figure. •Moreover, in respect of maintenance rrit is •, impossible by .reference to ordinary accounting of •daily, monthly or 'even yearly expenditure, to reduce total cost to an amount per mile. , • .. A. little _thought. will 'cony:ince the most' inexperienced operator that his highest expendintire on maintenance is not likely to conk' until the vehiclehas ran some 36,000 to 48,000 miles:whin might be three*-even lout' years from his first putting. -it inter'coinmissibin. He will be -paying small amounts all the time for repairs, adjustments and 'replace-:
ments, but the. costly item, the overhaul of engine and . , chassis, is not encountered until ' the brierator,_, has been in business for ,quite a' while and 1 is _of: no lige; as I have already mentioned, for him to ry to obtain satisfactory figures from a neighbour.' '
For one thing, that neighbour's mtperience Of expenditure on adjtistrnents already anentica*,-may be quite different' because he does the work himse0 compared with the first
operator who possibly pays the local agent to do the work for him. It may be, however, that the operator will at once be met with the need for spending on certain weekly maintenance routines so that the items involved, although small, will not be overlooked. The most obvious of these are washing and polishing, and greasing and oiling, as well as sundry weekly services, such as cleaning filters, which are recommended by the vehicle manufacturer.
Minor Expenses In a good many cases, of course, these minor routines are carried out by the driver during the 44 hrs. or More for which he is actually paid. In that case, the expenditure is already provided for under the heading of "driver's wages" and will not appear as a separate charge. There will he a certain small expenditure on cleaning materials, grease and oil, distilled water for batteries and so on, and these should not be overlooked, as they usually are, but should be properly •entered and debited against the vehicle is routine maintenance costs.
-If the. driver-does not do this work, then great expenditure Will be involved. A good average 'figure to cover Washing and polishing and greasing arid oiling is 12s. 6d per week. Another similar item is revarnishing the vehicle at the end of the first year and repainting at the end of the second year. It is certainly cheaper in the long run to look after the vehicle in that way although many operators do not seem to appreciate the fact that: bodywork lasts longer if regularly, painted and varnished. A modest charge to cover these two operations is about £50 for the two years, say 10i per week.
Sundry Items
In addition, there will be sundry items of a' similar nature which Will probably -amount to7s.6d. per week, sothat the total for cleaning and poliShing, painting and varnishing, greasing and oiling and sundries, amounts to 30s, per week. At 360 miles per week this, wdrks Out to 14. per mile, or id. per mile if the driver does the washing and polishing. and half of the sundries. • Routine maintenance, hovieVer,' is much less than half the total, That part of maintenatiee which' coveis minor repairs, adjustments and 'fel:I-laced-lents, ,Particularly to 'electrical equipment, may weli'ocist.at,muctoai. lid, or lid, per mile. Now I can add these running costs as shown in Table II.
The figures in this Table provide for the assumption that the driver does a certain amount of maintenance in the time in which he is paid wages. If however, he does not do any of this work and ithas' hasto -lie paid for; either in the wages. of" the :mechanic or in the bills Of a 'local motor dealer;• then another id. per mile' must be added, making
it 10d per mile instead of 9.o. Because of the growing popularity of the oil-engined
5-tormer, which, like the petrol-engined 5-tonner, is usually employed to carry 6-ton loads, I think I should deal in a similar manner' with the operating costs of this type of vehicle, There are two matters of ,importance Co bear in mind, one is the diminution in fuel costs with the oiler and-the other is its 'higher first cost. These two items must be balanced. It is easy to show that the fuel economy quickly offsets the extra expenditure on the vehicle, but the argument needs setting. down in black and white in order that the reader shall fully. understand the matter. I will deal first with the fuel cost. In the.. previous article relating to the petrcil-engined vehicle, I assuMeclothat the price for petrol was 3s. 5d. per gallon. For oil fuel, the price per gallon varies a little according to the bulk ofthe supplies, but I propose to take 3s, lid. as an average figure.
For fuel consumption, I assumed in the case of the petrolengined vehicle that 10 m.p.g. was quite applicable, bearing in mind that the vehicle was likely to be loaded with 6 tons. Under corresponding conditions, it is safe to assume that the oil-engined vehicle would return 181 m.p.g. 111 divide 3s.. lid., the cost of the fuel per gallon, by 18i I get the cost per mile for fuel as a fraction over 2d.
Stricter Attention
It is advisable, as I have adopted the. plan in the case of the petrol-ertgined vehicle, to link fuel and lubricants in these calculations, Lubricating oil for oil engines is more expensive than that used for petrol engines. Moreover, it is essential that Stricter attention be paid to the manufacturer's recommendations about the periods which may elapse between replenishing the.crankcase, and these periods are usually a little shorter for the oil engine than for the petrol engine.
. Taking these factcirs. into consideration, I propose to take the cost of the lubricant as 7s. 6d. per gallem, and taking the more frequent replenishments into account, the mileage per. gallon is likely to be 450, which gives roe .3/20d. per mile, and if I add that to the rather more than 2d. per mile for oil fuel I can reasonably take 210. per mile as the expenditure on fuel and lubricants. .
.The .nest point to consider is the. difference in first 'costs of the oil-e.ngined and, the petrol-engined velticles, so that may conveniently set the extra cost of the oiler' against the savings in fuel. To dealing with the petrol-engined vehicle assumed that the first cost of the vehicle, 'painted and lettered and ready for the road, was £1,030. A•similar'vehicle, fitted with an oil engine instead of a petrol engine, wilt cost £1,430.
Depreciation Figures This increase in initial outlay affects two of the items which appear in Tables I and II. It increases the amount to be set down for interest in Table I, also the additional depreciation in Table II. The interest, following the practice laid down in the previous article, is assessed at approximately 3 per cent., which means that 1 must estimate .on the basis of £43 per annum for the oil-engined_machine instead of £31. for the petrol-engined vehicle.
In dealing with depreciation I shall again follow the procedure described .previously, that is to say I shall take £185 for the cost of tyres, which leaves me with £1,245 as the net cost less tyres. I must now make.some assumption about the mileage which the vehicle will do before the operator decides to discard it, and what he is likely to redeem when he sells it.
tpropose to take the same figure for mileage as in the case of the petrol-engined, vehicle, namely, 180,000 miles. I shall also assume that the operator gets the same amount for the used oiler as we took for the used petrol-engined machine, £95, and subtracting £95 from £1,245, I get £1,150 as the basis for calculating depreciation.
In making this assumption, I am not being quite fair to the oil-engined vehicle. In the first place, as the life of a vehicle is to a large extent determined by the life of he engine, I could reasonably have assumed a longer life for the oiler. I could also have taken it that the operator would get a better price for the oiler than for the petrol-engined vehicle. These matters should be borne in mind.
If I reduce the £.1.150 to pence and divide by 180,000. I get practically lid, per mile as the debit against the vehicle on account of depreciation.
There is another item in Table II which needs some con
on
sideration in dealing with oil-engined vehicles Ind that is repairs and overhauls, It is generally agreed among users that taken over a tong period and given reasonable maintenance the cost of repairs and overhauls for the oil engine is less than for a petrol engine. Instead of Ild for that item, as quoted in Table 11 for the petrol engine, I shall take lid.
I can now set out figures corresponding to Tables I and II, inserting those appropriate to an oil-engined vehicle. They are given in Table III. I am going to regard the total as £498. If the reader is inclined to query any of the amounts, he should read the previous article in which 'explanation was given of the way in which the figures were calculated: This total is to be divided by 2,400 hrs. which gives me 4s. 2d. Per hour as the sum for standing charges for this vehicle.
The figures in these tables are vehicle operating costs only. Before any assessment of rates can be fixed, provision has to be made for establishment costs and a profit percentage. In this connection I intend to follow the procedure described in the previous article and add 50 per cent. to the standing charges to cover the establishment costs plus an allowance for profit, and I shall add 20 per cent, to the running cost, that being the assumed net profit.
Dealing with the petrol vehicle, standing charges are 4s. per hour and the running cost 9id. per mile. Adding 50 per cent. to the standing charges gives me 6s. per hour, adding 20 per cent, to the mile,age cost gives me Ilia. In the case of the oiler. adding 50 per cent, to the standing charges to cover establishment costs and profit gives me 6s. 3d. per hour, and adding 20 per cent, to the 741, running costs gives me 9id. per mile as the charge.
Application to Rates It may be useful to give a few examples of how to use these time and mileage figures. Assume that the operator concerned is offered a job which is going to take him 8 hrs. and involves 48 miles out and back. again, a total of 96 miles: For the 8 hrs. he must charge at the standing rate of 6s. per hour, and this comes to £2 8s., and for the 96 miles at Ilid. that is £4 12s. The total charge must be £7.
'Suppose there is a job which does not involve much delay in loading and unloading and that the operator manages to run the same 96 miles in only 4 hrs. His charges would then be four times 6s., £1 4s.; plus £4 I2s. for the 96 miles at'l lid. per mile, his total charge being £5 16s. If he has a little job to do which takes 1 hr. and involves 6 miles of running, then his figures are 6s. for the hour plus 6 miles at 11-id., which is 5s. 9d., the total being 11s. 9d. or 12s, per hour.
In the case of the oil-engined vehicle, similar methods cart be used, but generally speaking the charge necessary to make the same profit with the oiler would be less than that required in the case of a petrol vehicle. The point now arises as to what the operator of an oil-engined vehicle can do. Can he work on the basis of 9id. per mile and thus cut the rates of competitors who are using petrol-engined vehicles and must charge 1 lid. per mile?
To decide the answer, the reader should appreciate that the figures for charges that I have assessed are the minimum. He should get more if he can. My advice is to get the petrolengine price and accept the extra profit as the reward for enterprise in selecting an oilsengined vehicle. S.T.R