Calculating cost of operating vehicles Flashcards
Cost Center
Grouping lorries together to create cost centres. e.g. 12 40 tonne artics and 10 18tonne rigids, would be 12 x 40 tonne in one cost centre and 10x18tonne in another cost centre.
Cost unit
What it costs by tonne or kilometre to deliver goods
Direct Costs
Costs allocated directly to running a vehicle e.g fuel, vehicle tax, tyres, insurance, drivers wage
Indirect costs
Costs to run the business, not directly related to running a vehicle. e/g overheads, admin, office wages, heating and lighting.
Fixed costs
Always apply whether the vehicle moves or not, also known as standing costs e.g licensing, insurance and depreciation.
Variable Costs
Also known as running costs, these will vary, e.g fuel, tyres etc
Vehicle Standing costs
Not likely to change. Vehicle Insurance Vehicle Excise Duty, (TAX) Drivers Wages NI contribution costs Administration Costs Vehicles Depreciation Value
Vehicle Deprecitation
Over the lifetime of a vehicle, for costing purposes in a business, the cost of a vehicle will be written off.
Two ways to work out Depreciation:
Straight line method
Reducing Balance Method
Original tyre equipment needs to be considered as a running cost so is deducted from original vehicle cost.
Straight line method
Need the original Vehicle cost, the original tyre cost and the cost of expected resale value.
example - 8 wheeled vehicle
Purchase price : £95,000
Tyre Equipment : £ 3200 (based on 8 tyres at £400)
Purchase price ex tyres : £ 91,800
Expected Resale Value: £ 18,360 (Based on resale being 20% in this example
Total Depreciation : £73, 440
Vehicle has a 5 year lifespan so we divide the Depreciation by the lifespan to get the amount that the vehicle will depreciate per year. £73,440 / 5 = £14,688
Depreciation per year is £14,688 over a 5 year lifespan
Reducing Balance Method
More complicated but may give a more realistic figure.
Still using the 8 wheeled example minus original tyre cost = £91,800
‘Estimating a vehicle lifespan of 5 years and a depreciation rate of 20% per year.
In the first year the vehicle will depreciate by £18,360
95000 - 3200 = 91800 x 20% = 18360
91,800 - 18360 =73440 - This is the value left to depreciate over the next 4 years
£73,440 x 20% = £14,688 for the 2nd years depreciation
£73,440 - £14,688 = £58,752 this is the value left to depreciate over the next three years….
Continue in this way until you get to the final price, in this case £30,081.02
Trailer Depreciation
Add together the cost of all trailers and divide the figure by the number of towing vehicles
8 Trailers
6 Tractor Units
£1600 depreciation value per year
Standing cost for the trailers is £1600 X 8 = £12,800
Depreciation now needs to be allocated to each tractor unit. £12,88 / 6 = “2133.33 per year
Admin costs
Basically the companies overheads : Lighting Heating Office Salaries Telephone Postage Rates Rent Printing Business insurance etc
Good practise is to to portion Admin costs eqully over the vehicles
Eg, Total number of vehicle’s 22 , and costs to apportion are £140,000
£140000 / 22 = £6363.63
If vehicles are different sizes we work pit the price per vehicle.
10 x 16tonne vehicles = 160 tonnes
12 x 40tonne vehicles = 480 tonnes
Totally tonnage = 640 tonnes
Admin costs per tonne 140,000 / 640 = £218.75
for each 16 tonne vehicle £218.75 x 16 = £3500
For each 40 tonne vehicle £218.75 x 12 = £8750
Administration costs apportioned to payload
Admin costs of £14000 and 22 vehicles in the fleet
Split admin costs in half and allocate half to vehicles and half to payload.
£140,000 / 2 = £70,000
Take the first £70,000 and divide by the 22 vehicles = £3181.81 per vehicle.
then take the 2nd £70,000 and divide by the total of 640 tonnes = £109.375 per tonne carrying capacity
