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Compiling A Rates Schedulc

3rd November 1961
Page 74
Page 79
Page 74, 3rd November 1961 — Compiling A Rates Schedulc
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Costs and Charges for Operating a 7-ton Tipper are Calculated for Varying Mileages with Appropriate Time Allowances

BECAUSE time and mileage are the two fundamental elements in vehicle operation it is appropriate that they should be reflected in any method of recording the cost of such operation. It is therefore standard practice in this series of articles and " The Commercial Motor" Tables of Operating Costs to segregate the several items of expenditure involved as between standard costs and running costs. By a coincidence there happens to be five items in each group. Standing costs consist of licences, wages, rent and rates; insurance and interest, whilst the five items of running costs are fuel, lubricants, tyres. maintenance and depreciation.

Standing costs are normally shown as a total cost per annum. per week or per hour, whilst running costs are set out in pence per mile, usually to two decimal places. Whilst in the majority of circumstances the mileage involved in any particular job will be known beforehand with reasonable accuracy, this by no means applies as to the time likely to be necessary to complete operations covered by general rates schedules. This increasingly applies today because of the many traffic delays over which the operator has no control.

When a quotation is requested for a job of sufficient proportions to justify a special assessment of all the factors involved. proper allowance can be made for both the time and mileage involved. Additionally, if the time factor is uncertain, the quotation can be made in the form of a charge per hour plus a charge per mile.

There are, however, many types of work in which it is not• practicable to submit individual quotations for each job, but for which it is nevertheless necessary to vary the charge as one or more factors vary, the most common being the mileage run and tonnage carried. For the convenience of both operator and customer it is therefore common practice to evolve rate schedules of varying complexity to meet the requirements of a wide range of traffics and services.

AS an indication of the manner in which such a rate schedule can be built up. the cost of operating a 7-ton tipper is estimated and the result applied to varying leads ranging from one to 20 miles. Lead mileage is, of course, the distance for a single journey between the collection and delivery points, with the result that the complete return trip would involve double that mileage.

As distinct from general and long-distance haulage, where it is often possible to give a specific quotation between the two

points involved, this is often impracticable for shorter dista and particularly in the type of work undertaken by tippers. meet this latter situation a rate schedule drawn up on the of radial. miles from a central point is convenient to operator and customer. For this Purpose, however, it wil appreciated that the direct distance between any two p( on a map will not be the equivalent of the actual road mile On average, nine road miles will be covered in trave between two points seven miles distant on a map.

Dealing first with the actual cost of operating a 7-ton tig it will be assumed that the vehicle is fitted with an oil en and that the resulting unladen weight is around 3 tons 121 This would incur an annual licence duty of 155 10s., or equivalent of LI 3s. 10d. a week. This is calculated on basis of a 50-week year to allow for two weeks per an when the vehicle may be off the road for major overhau driver's annual holiday and the remaining weekly stan costs are similarly apportioned.

THE cost to the employer of driver's wages for a stan. 44-hour week is reckoned to he £10 3s, This amount is b on the minimum statutory remuneration payable to an driver based in a Grade 1 area as defined in the Road Hau Wages Council Regulations R.H.(70), which at present a although the new Regulations R.H.(72) come into operc on January 1, 1962. To this basic amount is added the to the employer of contributions to the new Graduated Pen and National Insurance and also voluntary employer's in( nity insurance, which replaces the former Workmen's Corn sation Act. An addition is also made to provide for the of holidays with pay.

When dealing with the cost of wages involved in a sp; job, it may be possible to estimate beforehand the additi expenditure likely to be incurred in overtime working. prior knowledge, however, is obviously not available v compiling a rate schedule for general use and in this inst the amount appropriate to a standard working week is t Also the hourly calculations are made on the basis of a 44-1 week because this still applies, although it is appreciated as from January 1 this will be reduced to 42 hours.

At first sight it may seem that it should be possibl incorporate a proportionally higher wages cost as the ave weekly mileage increases, but such calculations are no (Continued on page 457) deas would first appear. This is because the proportion !rminal time under differing conditions of operation is not ssarily related to the mileage run and, similarly, the total s worked are not necessarily indicative of the mileage run. should also be borne in mind that when the basic week hours (as it is at present) is exceeded, the four remaining fing costs, other than wages, should have been met by me received for the first 44 hours. It therefore follows above 44 hours the only remaining standing cost which Id have to be met is the item of wages, even though this be at the higher rate necessitated by overtime working. :nt and rates in respect of garaging the vehicle are assessed s. lid, a week whilst insurance adds £2 10s. lid.

will be assumed that the initial outlay on this oil-engined tipper is £1450 and, allowing a nominal rate of interest per cent., the equivalent weekly interest charge would sat to £1 9s. The total for the five items of standing cost )refore £15 19s, 8d.

ding now with the five items of running costs the major diture in this group will be on fuel. It will be assumed Jet oil is purchased in bulk at 4s. lid, a gallon, and that erage rate of consumption of 13 m.p.g. is maintained. price, incidentally, includes the recent increase of 3d. a in the fuel tax as announced in the "Little Budget." esulting fuel cost per mile is therefore 3.83d.

iricants are reckoned to add 0.25d, a mile and tyres 1.79d. ost of a set of tyres for this vehicle is assessed at £186, tecause of the heavy usage normally associated with work, a 20 per cent. addition to the cost normally is made in this instance. For the same reason, a 20 int. increase is included in the maintenance cost, which tecomes 3.29d, a mile.

fifth item of running cost—depreciation—is reckoned 2.68d. a mile. This is obtained by first deducting the lent cost of the original set of tyres from the initial A the vehicle followed by a further deduction on account ultimate residual value which is here reckoned as 10 per A the initial mice. The mileage life of the vehicle is ed to be 100,000, the equivalent of four years at an e of 500 miles a week, total running cost is therefore 11.84d. a mile. As in the I the total standing cost, however, this amount represents te cost to the operator of expenditure directly chargeable pecific vehicle. Before charges can be formulated for ion to customers, both overhead costs and profit margin a be added to the basic operating cost.

-head or establishment costs consist of those items of 'Rum incurred in the operation of a business as a whole lich cannot be directly charged to any particular vehicle more than one is operated. Such costs could include es grouped under a variety of headings such as manageoffice administration, garage and other items.

11 here be reckoned that an amount equivalent to 20 per f the total operating cost be allowed as overhead costs and a similar amount for profit margin. The resulting charge per week would then be £22 7s. 6d. (based on an operating cost of £15 19s. 8d.), whilst the charge per hour would become 10s. 2d. Similarly, the charge per mile becomes 16.58d.. or approximately Is. 44d.

When calculating a rate schedule of charges for varying leads of relatively short distances, it is imperative that particular attention must be paid to the time factor if the operator is to receive an adequate return on his work. It is not sufficient that the time allowed on the shorter hauls should be calculated directly pro rata to that allowed for the longer journeys. This is because on exceptionally short journeys, the human factor has to be allowed for and as distances become shorter there is a tendency for loading and unloading times to increase, unless adequate control is maintained.

On short distances, also, the time allowed per mile must also be increased. This is because although an average of, say, 20 m.p.h. might be quite reasonable over a medium distance. this rate of progress could not be attained over the first few miles. It is therefore essential to assess both terminal and travelling time for short leads in rather more detail than would at first seem necessary.

Whilst the difference in the amount of the total charge so obtained as compared with the more simple and straightforward calculation may be comparatively small for a simple trip, it should be borne in mind that many such trips would be accomplished during one working week. As a result the total difference for the week could be substantial and would represent additional profit or loss to the operator.

There are several methods employed in making allowance for this variation in the time factor as the mileage decreases. The one used in compiling the table shown alongside is to allow time for varying average speeds as the mileage increases. It must be appreciated, however, especially under modern traffic conditions, that any estimate of average speed must be to some -extent arbitrary and require adjustment in particular areas or circumstances.

IT is here assumed that the first mile of any sing16 journey. or lead, will be completed in 12 minutes, the equivalent of an average speed of 5 m.p.h. The second mile is assumed to be covered in six minutes, or at 10 m.p.h. It is then reckoned that the vehicle will average 15 m.p.h. for the next eight miles, from the third to the tenth mile inclusive, the equivalent oi four minutes per mile, whilst from 11 to 20 miles the rate would increase to 20 m.p.h.. or three minutes per mile.

In making the necessary calculations on the basis of these average speeds two pitfalls must be avoided. In the first place the whole of the calculations should be first made on the basis of a time allowance for a single trip or lead, and the total then doubled for the return journey: Secondly, it is essential that the varying times should be added for each successive mile. It would be incorrect to proceed on the basis that because the tenth mile in any lead is estimated to take four minutes, the total time for a 10-mile lead is 40 minutes. In fact, the actual time should be 50 minutes, which is obtained by allowing 12 minutes for the first mile, six minutes for the second mile and four minutes each for the remaining eight miles.

The cost of the travelling time is then obtained by multiplying the total allowed time by the charge per hour. and for easy reckoning this is slightly adjusted to the equivalent of 2d. pei minute. Similarly, the mileage charge is obtained by a straightforward multiplication of the appropriate mileage and the previously calculated charge of Is. 44d. a mile. Incidentally, in making this calculation the total mileage will, of course, be the return mileage and not the lead or single trip mileage, and it is to emphasize this point that the second column has been included in this table.

Terminal times will vary substantially according to individual circumstances and the time allowed for here, namely one hour, is nominal in amount, but is included to ensure that its equivalent cost to the operator is not omitted from the charge he submits to his customer.

These three items of cost, relative to travelling time, mileage and terminal time are added to give a total charge as shown in column 7. If required. this can then be divided by the carrying capacity of the vehicle to give a charge per ton varying according to the length of lead. S.B.

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