A

Project
On
OVERVIEW OF OPERATING COSTING
SUBMITTED BY
UPADHYAY UMESH POOJA ROLL NO.101
MASTER OF COMMERCE PART I SEMESTER II
PROJECT GUIDE
DR. SANDEEP PODDAR
SUBMITTED TO
UNIVERSITY OF MUMBAI
RAJASTHANI SAMMMELANS
GHANSHYAMDAS SARAF COLLEGE
OF ARTS & COMMERCE
AFFILIATED TO UNIVERSITY OF MUMBAI
REACRREDATED BY NAAC WITH A GRADE
S.V ROAD , MALAD (WEST),
MUMBAI 400 064
A.Y. 2014-2015

RAJASTHANI SAMMMELANS
GHANSHYAMDAS SARAF COLLEGE
OF ARTS & COMMERCE
AFFILIATED TO UNIVERSITY OF MUMBAI
REACRREDATED BY NAAC WITH A GRADE
S.V ROAD, MALAD (WEST),
MUMBAI 400 064
A.Y. 2014-2015

CERTIFICATE
I Dr. Sandeep Poddar hereby certify that UpadhyayUmeshPooja a
student of GhanshyamdasSaraf College of Arts & Commerce,
M.Com I, and Semester- I has completed Project on Overview of
Operating Costing in the Academic Year 2014-2015
Thus information submitted is true & original to the best of my
Knowledge

Project Guide: Dr. Sandeep Poddar

SujataKarmarkar
Date:

External Examiner:
2

Principal:

Dr.

Date:

College Seal:

ACKNOWLEDGEMENT

I take this opportunity to thank the UNIVERSITY OF MUMBAI for

giving me a chance to do this project.
I express my sincere gratitude to the Principal Dr.
SujataKarmarkar, Chief Co-ordinator& Guide Dr. Sandeep Poddar
teaching faculty and our Librarian for their constant support &
helping for completing the project.
I am also grateful to my friends for giving me moral support
during the course of my project work. Lastly, I would like to thank
each & every person who helped me in completing the project
successfully especially MY PARENTS.

Signature
3

UpadhyayUmeshPooja

DECLARATION

I UpadhyayUmeshPooja a student of GhanshyamdasSaraf

College of Arts & Commerce, Malad (W), M.Com I, Semester II
hereby declare that I have completed project on Overview of
Operating Costingin the academic year 2014-2015. This
information submitted is true & original to the best of my
knowledge.

Date:

Signature

INDEX
Sr. No

Chapter Name

Page No

Executive Summary

Research Methodology

Objective of the Study

Scope of the Study

Mythology of The Study

Introduction Operating Costing

08-16

17-29

Overview of Operating Costing

(Freight Metrics Pvt Ltd)
Data Analysis

Conclusion

31

Bibliography

32

30

EXECUTIVE SUMMARY
Operating costs are the expenses which are related to the operation of a business, or to the
operation of a device, component, piece of equipment or facility. They are the cost of resources
used by an organization just to maintain its existence.
Operation costing is a mix of job costing and process costing, and is used in either of the
following situations:
A product initially uses different raw materials, and is then finished using a common

process that is the same for a group of products; or

A product initially has identical processing for a group of products, and is then finished

using more product-specific procedures.

n both cases, you use a mix of job costing and process costing to compile the cost of a
product; this mixed costing environment is called operation costing. The job costing
element is based on the concept that you can assign costs to specific products, which is
the case when something is produced in units of one or in very small quantities. The
process costing element is based on the concept that you allocate the cost of producing a
large group of products equally to all the products in that group, since they are
manufactured in an identical manner.

In short, operation costing is most applicable to the more complex manufacturing

environments that require a mix of different types of production processes in order to
create goods.

RESEARCH METHODOLOGY
STATEMENT OF THE PROBLEM:
The main focus is on the operating costs of a Transport Company Freight Metrics Pvt Ltd.

OBJECTIVES OF THE STUDY:

The study of operating costs of a coal mine proposes the following:
To identify the operations of the Transport.
To identify the cost per vehicles on this company.
To find the associated with the process under various Vehicles.
SCOPE OF STUDY:
The area of the study was restricted to the Sing Freight Metrics Pvt Ltd and its operations.

METHODOLOGY OF THE STUDY:

Data collection methodsthe study is based on both secondary and examines thetotal costs vs.
operating costs. The results are drawn mainly fromthe primary and secondary data
collected.Secondary data has been collected from the various sourcessuch as
Publications of the company.
7

Business magazines.
Journal, text books.
Websites.

INTRODUCTION OF OPERATING COSTING:

The method of costing used in service rendering undertakingsis known as operating costing. This
method of costing is generally made use of by transport companies, gas and water works
departments, electricity supply companies, canteens, hospitals, theatres, schools etc.
n both cases, you use a mix of job costing and process costing to compile the cost of a product;
this mixed costing environment is called operation costing. The job costing element is based on
the concept that you can assign costs to specific products, which is the case when something is
produced in units of one or in very small quantities. The process costing element is based on the
concept that you allocate the cost of producing a large group of products equally to all the
products in that group, since they are manufactured in an identical manner.
In short, operation costing is most applicable to the more complex manufacturing environments
that require a mix of different types of production processes in order to create goods.
Operating costing is a method of costing applied by undertakings which provide service rather
than production of commodities. Like unit costing and process costing, operating costing is thus
a form of operation costing. The emphasis under operating costing is on the ascertainment of cost
of rendering services rather than on the cost of manufacturing a product. It is applied by transport
companies, gas and water works, electricity supply companies, canteens, hospitals, theatres,
school etc. Within an organization itself certain departments too are known as service
departments which provide ancillary services to the production departments. For example:
maintenance department; power house; boiler house; canteen; hospital; internal transport.
Operation costing offers better scope for control. It facilitates the computation of unit operation
cost at the end of each operation by dividing the total operation cost by total input units. It is the
category of the basic costing method, applicable, where standardized goods or services result
from a sequence of repetitive and more or less continuous operations, or processes to which costs
are charged before being averaged over the units produced during the period. The two costing
methods included under this head are process costing and service costing.
8

DEFINITION OF TERMS

CIMA has defined Operating Costing As that form of operation costing which applies
when standardized services are provided either y an undertaking or by a service cost center
within an undertaking.
Cost Accounting Standard 1 by ICWA defines Operating Cost As the cost incurred in
conducting a business activity. Operating costs refer to the cost of undertakings, which do
not manufacture any product but which provide services.

Preparation of Cost Sheet under Operating Costing: For preparing a cost sheet under operating
cost, costs are usually accumulated for a specified period viz., a month, a quarter, or a year etc.
All of the accumulated costs should be classified under the following three heads:
1. Fixed costs or standing charges,
2. Variable costs or running charges,( Fuel, Driver Wages, Depreciation, oil etc.)
3. Semi-variable costs or maintenance costs. (Supervision salary, Repairs and Maintenance)
Note : In the absence of information about semi-variable costs, the costs may be shown under
two heads only, i.e., fixed and variable. Under operating costing, the per unit cost of service may
be calculated by dividing the total cost for the period by the total units of service in the period.
Operating ratio is computed by dividing operating expenses by net sales. It is expressed in
percentage.

Formula:
Operating ratio is computed as follows:

The basic components of the formula are operating cost and net sales. Operating cost is equal to
cost of goods sold plus operating expenses. Non-operating expenses such as interest charges,
taxes etc., are excluded from the computations.

10

The total operating costs of your company include all costs except those directly related to the
product you sell. These costs include sales and marketing costs, rent, office supplies, salaries for
the office workers and utilities. This is how much your company would spend if it didn't make
any products. The total of these costs, over a given time, are the operating costs for that period. If
you want to calculate the break-even volume for the next month, you need the total operating
costs for that month.
Variable Costs
Your company also spends money on making the product. These are variable costs, because they
depend on the volume of products manufactured, and they consist of materials, parts and labor.
You can calculate the variable costs by adding the cost of materials used, the amount spent on
buying parts and the wages paid out over a typical period. You divide the total by the number of
items produced in that period. The result is the average cost per item.
Profit
To calculate the break-even volume, you need the amount of profit you are making on your sales.
This profit pays for your operating costs. The profit is the selling price of an item minus the cost
per item, and the time frame must be the same as the one you used to calculate the variable costs.
Add total revenue for that period and divide by the number of items sold to get the average
selling price per item. Subtract the average cost per item to get the profit per item.
Break-Even Volume
To calculate the break-even volume for next month, you divide the projected total operating costs
for that month by the profit per item. At the break-even volume, the total profit from the sale of
your products covers the total operating costs for that month. If your projected total operating
costs for May are $10,000 and your average profit per item is $10, you have to sell 1,000 items
in May to break even. This means your marketing department has to target May sales of perhaps
1,200 or 1,500 items to make a reasonable profit.

11

FEATURES OF STANDARD COSTING

1. It is a process of accounting for costs.
2. It records income and expenditure relating to goods andservices.
3. It provides statistical data on the basis of which future estimates are prepared
4. And quotations are submitted.
5. It is concerned with cost ascertainment, cost control and costreduction.
6. Finally it involves the preparation of right information to theright person at the right time so
that it may be helpful tomanagement for planning, evaluation of performance, controland
decision-making.

ADVANTAGES OF STANDARD COSTING

1. It enables a concern to measure the efficiency and then tomaintain and improve it. This
can be done with the help of comparison of data made available of the previous
periodsand current period
2. It provides information upon which estimates and tenders arebased.
3. It guides for future production polices. It explains the cost incurred and there by provides
data on the basis of whichproduction can be appropriately planned.
4. The extract cause of decrease or increase in profit/loss can bed ejected. A concern may
suffer not because of the cost of production is high or prices are low but also because the
output is much below the capacity of the concern.
5. Efficiency of public enterprises. Costing has a more important role to play in public
enterprises than in private enterprises. The primary objective of the public enterprises is
not to raise profits but it is to serve the society by providing quality good at cheaper rates.

The main objective of operating costing is to compute the cost of the services offered by the
organization. For doing this, it is necessary to decide the unit of cost in such cases. The cost
units vary from industry to industry. For example, in goods transport industry, cost per ton
kilometer is to be ascertained while in case of passenger transport, cost per passenger kilometer
is to be computed.
12

Sources of Operating Costs

Part of Toolkit for the Economic Evaluation of World Bank Transport Projects
Historically, road vehicle operating costs have tended to dominate highway
economic appraisals in developing countries due to the poor road surfaces that can
occur there
.the operating costs of railways and ports are also substantial and form key
components of cost benefit analyses of their associated infrastructure.
the definition of operating costs for World Bank projects is therefore important in
obtaining a reliable economic appraisal.
Section introduces the key issues associated with operating costs, whilst the
following sections discuss the components and sources of operating costs by mode.
Road vehicle operating costs are presented in Section, railway operating costs in
Section and port operating costs in Section.

Operating Costs Key Issues

Costs accrued during the functioning of the transport infrastructure are borne by:

13

Users (e.g. vehicle drivers/passengers where they are the owners of the vehicle and ships
whilst in port)
Service providers (e.g. the operators of public transport services (e.g. rail service) or the
owners of vehicles driven by others (e.g. road haulage firm)).
Infrastructure
Landlord
or owner
This note concerns the first two (i.e. users and service providers).
the costs borne by the infrastructure owner or landlord are described in the Note
Treatment of Maintenance.
Operating costs can be influenced by the regulatory and institutional characteristics
of the environment in which the transport industry in a particular country sits.
This is particularly the case for the rail, shipping and air sectors.
Local country specific data and relationships on operating costs for these sectors
should therefore be utilized wherever possible, though in many cases the
availability of such data will depend upon the accounting practices within that
sector (country specific)
. Operating cost relationships for road vehicles are far more generic and
transferable between countries.
Off the shelf models and computer software exists for the calculation of such road
vehicle operating costs, however, these models require to be populated with some
local data.
Operating costs are also influenced by the transport infrastructure maintenance
strategy particularly in areas subject to periodic environmental shocks (e.g. a wet
season).

14

If transport infrastructure is not maintained operating costs can increase

significantly.

Operating

cost

calculations

should

therefore

reflect

the

infrastructure

maintenance strategy (see the Note Treatment of Maintenance.

In some situations, particularly regulated sectors, the infrastructure landlord and the
service provider are the same body (e.g. a nationalized railway network or a port
authority).
In other situations the infrastructure landlord and the service provider maybe
separate bodies but the service provider may pay the landlord for access to the
infrastructure on variable basis (e.g. for trains on a per km of track travelled).
this payment by the service provider would include a component for the
maintenance of the infrastructure, but from the point of view of the service provider
would be considered an operating cost of the service.
In such situations it may be difficult to distinguish between operating and
maintenance costs and it may be easier to consider the two simultaneously,
ensuring however that there is no double counting.
In the case of all economic appraisals of transport investment projects the key input
with respect to operating costs is the change in operating costs with and without
the project.
However, the nature that this change is brought about will determine whether an
incremental or absolute operating cost model is required.
An incremental model will be sufficient for majority of situations that will be
assessed as part of a World Bank funded project.
within an incremental model it is expected that unit costs of operation will not
alter significantly after the investment.

An Absolute Model: would be required where the unit costs of operation are expected to
alter significantly after the investment.

15

Examples would include the replacement of a significant percentage of the bus vehicle fleet or
some form of regulatory reform occurring simultaneously with the investment (such as
privatization or commercialization).
in such a situation a full understanding of the existing operating cost structure of the sector
will be required as well as any efficiency improvements that the reform may bring about.

16

Freight Metrics
Pvt Ltd
---------Driving Knowledge

T he
Freight
Metrics
Truck
Freight Metrics provides the road transport industry, operating cost calculators, tools
and trip planners,
to help owner drivers and transport operators assess their truck and courier operating
costs and to
promote fair pricing discussion within the industry. Freight Metrics also provides the
road
freight industry with Saferates.com.au giving industry the opportunity to discuss
sustainable rates,
and a place to keep up with industry discussions to encourage safe driving practices
and safer road use.
Just plug in your vehicle operating figures and see what the effects are on your costs
and margin.
17

Operating Cost Calculator has been developed over the last 17 years and online since 2008 in
attempt to accommodate the costs for what can be reasonably expected for a majority of heavy
and light vehicles.

The calculator forms provides a freight pricing reference using a common

costing methodology in a transparent way for transport vehicle owners, operators and customers
to clarify that quotes and charges are fair and reasonable.

Further, they provide the starting

point for establishing the job, and the requirements and information to enable informed dialogue
for decision making whilst allowing stakeholders the opportunity to use and test their own
figures. The informative tools and calculators have been developed specifically such that a
layman of reasonable intellect can source information and apply current legislated or regulated
values (e.g. modern award rates), input their operating costs using their own figures for capital
equipment, overheads, sustaining capital and operating costs in a simple format to enable
informed

decision

making

Transportation

Metrics:

Freight cost per unit shipped: Calculated by dividing total freight costs by number of units
shipped per period. Useful in businesses where units of measure are standard (e.g., pounds).
Can also be calculated by mode (barge, rail, ocean, truckload, less-than-truckload, small
package,

air

freight,

intermodal,

etc.).

Outbound freight costs as percentage of net sales: Calculated by dividing outbound freight costs
by net sales. Most accounting systems can separate "freight in" and "freight out." Percentage
can vary with sales mix, but is an excellent indicator of the transportation financial performance.
Inbound freight costs as percentage of purchases. Calculated by dividing inbound freight costs
by purchase dollars. It is important to understand the underlying detail. The measurement can
vary widely, depending on whether raw materials are purchased on a delivered, prepaid, or
collect

basis.

Transit time: Measured by the number of days (or hours) from the time a shipment leaves your
facility to the time it arrives at the customer's location. Often measured against a standard transit
time quoted by the carrier for each traffic lane. Unless you are integrated into your customers'
systems, you will have to rely on freight carriers to report their own performance. This is often
18

an important component of lead-time. Transit times can vary substantially, based on freight mode
and carrier systems.
Claims as % of freight costs: Calculated by dividing total loss and damage claims by total
freight costs. Generally measured in total and for each carrier. A high number generally
indicates

packaging

problems,

or

process

problems

at

the

carrier.

Freight bill accuracy. Calculated by dividing the number of error-free freight bills by the total
number of freight bills in the period. Errors can include incorrect pricing, incorrect weights,
incomplete

information,

etc.

Generally

measured

in

total

and

for

each

carrier.

Accessorial as percent of total freight: Calculated by dividing accessorial and surcharges by total
freight expenditures for the period. Many freight carriers will charge extra fees for trailer
detention/demurrage, re-delivery, fuel increases, and other expenses or extra services. Often,
these

are

extra

costs

incurred

due

to

inefficient

processes.

Percent of truckload capacity utilized: Generally used for shipments over 10,000 lbs. Calculated
by dividing the total pounds shipped by the theoretical maximum. For example, assume your
trucks can hold 40,000 lbs. of product. During the prior month, there were 675 shipments
totaling 22.95MM lbs. The percentage utilization was 85%. The 15% unused capacity is an
opportunity

for

more

efficiency.

Mode selection vs. optimal: This is calculated by dividing the number of shipments sent via the
optimal mode by the total number of shipments for the period. To measure this, each traffic lane
must have a designated optimal mode, based on freight costs and customer service requirements.
Truck turnaround time: This is calculated by measuring the average time elapsed between a
truck's arrival at your facility and its departure. This is an indicator of the efficiency of your lot
and dock door space, receiving processes, and shipping processes. This also directly affects
freight

carrier

profits

on

19

your

business.

Shipment visibility/traceability percent: Calculated by dividing the total number of shipments

via carriers with order tracking systems, by the total number of shipments sent during a period.
This is an indicator of the relative sophistication of your carrier base, and one measure of the
non-price

value

available

from

your

carrier

base.

Number of carriers per mode: Calculated by counting the total number of freight carriers used in
a given period, by mode (ocean, barge, rail, intermodal, truckload, LTL, small package, etc.).
This is an indication of your volume leverage and control over the transportation function.
On-time pickups: Calculated by dividing the number of pick-ups made on-time (by the freight
carrier) by the total number of shipments in a period. This is an indication of freight carrier
performance, and carriers' affect on your shipping operations and customer service.

Transportation Metrics that Matter the Most

Freight cost per unit shipped: Calculated by dividing total freight costs by number of
units shipped per period. Useful in businesses where units of measure are standard (e.g.,
pounds). Can also be calculated by mode (barge, rail,ocean, truckload, less-thantruckload, small package, air freight, intermodal, etc.).

Outbound freight costs as percentage of net sales: Calculated by dividing outbound

freight costs by net sales. Most accounting systems can separate freight in and freight
out. Percentage can vary with sales mix, but is an excellent indicator of the
transportation financial performance.

Inbound freight costs as percentage of purchases. Calculated by dividing inbound freight

costs by purchase dollars. It is important to understand the underlying detail. The

20

measurement can vary widely, depending on whether raw materials are purchased on a
delivered, prepaid, or collect basis.

Transit time: Measured by the number of days (or hours) from the time a shipment
leaves your facility to the time it arrives at the customers location. Often measured
against a standard transit time quoted by the carrier for each traffic lane. Unless you are
integrated into your customers systems, you will have to rely on freight carriers to report
their own performance. This is often an important component of lead-time. Transit times
can vary substantially, based on freight mode and carrier systems.

Claims as % of freight costs: Calculated by dividing total loss and damage claims by
total freight costs. Generally measured in total and for each carrier. A high number
generally indicates packaging problems, or process problems at the carrier.

Freight bill accuracy: Calculated by dividing the number of error-free freight bills by the
total number of freight bills in the period. Errors can include incorrect pricing, incorrect
weights, incomplete information, etc. Generally measured in total and for each carrier.

Accessorials as percent of total freight: Calculated by dividing accessorial and surcharges

by total freight expenditures for the period. Many freight carriers will charge extra fees
for trailer detention/demurrage, re-delivery, fuel increases, and other expenses or extra
services. Often, these are extra costs incurred due to inefficient processes.

Percent of truckload capacity utilized: Generally used for shipments over 10,000 lbs.
Calculated by dividing the total pounds shipped by the theoretical maximum. For
example, assume your trucks can hold 40,000 lbs. of product. During the prior month,
there were 675 shipments totaling 22.95MM lbs. The percentage utilization was 85%.
The 15% unused capacity is an opportunity for more efficiency.

Mode selection vs. optimal: This is calculated by dividing the number of shipments sent
via the optimal mode by the total number of shipments for the period. To measure this,
each traffic lane must have a designated optimal mode, based on freight costs and
customer service requirements.
21

Truck turnaround time: This is calculated by measuring the average time elapsed
between a trucks arrival at your facility and its departure. This is an indicator of the
efficiency of your lot and dock door space, receiving processes, and shipping processes.
This also directly affects freight carrier profits on your business.

Shipment visibility/traceability percent: Calculated by dividing the total number of

shipments via carriers with order tracking systems, by the total number of shipments sent
during a period. This is an indicator of the relative sophistication of your carrier base,
and one measure of the non-price value available from your carrier base.

Number of carriers per shipment: Calculated by counting the total number of freight
carriers used in a given period, by shipment. This is an indication of your volume
leverage and control over the transportation function.

On-time pickups: Calculated by dividing the number of pick-ups made on-time (by the
freight carrier) by the total number of shipments in a period. This is an indication of
freight carrier performance, and carriers effect on your shipping operations and customer
service.

Keep the Following in Mind When It Comes to Tracking Transportation

Metrics
1. Tracking your transportation metrics allows you to view your performance over time and
guides you on how to optimize your logistics and supply chain operations. Tracking these
core metrics allows management to identify problem areas and fix them with data AND
22

experience. It also allows for comparison to other companies through like industry
benchmarking.
2. Certain metrics, have a widely accepted definitions. Other metrics may need to be
customized for your particular industry or logistics business model.
3. Measurements alone are not the solution to your weak areas! The solution lies in the
corrective actions that you take to improve the measure. The solution comes from process
or system improvements. The measurements should be used to track the results of your
improvement efforts.
4. Tracking transportation metrics should have an owner. This needs to be a person or
department that is responsible for achieving an agreed upon target on the metric.
5. Management needs to adopt, encourage, and support the process changes to achieve the
desired targets.

Limitations

23

This publication was prepared by PricewaterhouseCoopers LLP (PwC) under contract with the support
ofthe United States Department of Transportation, Maritime Administration, under contract no. GS-10F0466N / DTMA1F10136.
This publication is limited to the approach and analysis described herein and on information publicly
Available as of September 16, 2011. No representation or warranty (express or implied) is given as to the
accuracy or completeness of the information contained in this publication, and the extent permitted by
law, PwC and PwCIL and its members, employees and agents do not accept any liability, responsibility, or
duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the
Information contained in this publication or for any decision based on it.
PwC refers to PricewaterhouseCoopers LLP as the U.S. member firm of PricewaterhouseCoopers
International Limited (PwCIL). Each member firm is a separate legal entity and does not act as agent of
PwCIL or any member firm.

Annual Cost Statement of vehicles

$
24

Diesel {(1,34,784 km. 4 km) 10)

3,36,960

Oil & sundries {(1,34,784 km. 100 km.) 25}

33,696

Maintenance {(1,34,784 km. 0.25) +6,000}

39,696

Drivers' salary {2,000 12 months) 3 trucks}

72000

Licence and taxes (5,000 3 trucks)

15000

Insurance
Depreciation {(2,90,000 10 years) 3 trucks}

5000
87000

General Overheads
Total Annual Cost

11084
600436

Cost per km.run

Cost per kilometer run= total annual cost of vehicles/ Totalkilometre travelled annually
= 600436/134784 Kms=4.4548

Freight rate per tonne km (to yield a profit of 10% on freight)

Cost per tonne km = total Annual cost of vehicles / Total Effective tone kms per annuam
= 600436/525312 kms =1.143
25

Freight rate per tonne km. (1.143/0.9x1=1.27)

Working Note1. Total kilometre travelled and tonneskilometre (load carried) by three trucks in one year
Truck

One way

No. of

Total

Load

Total

number

distance in

trips

distance

carried per

effective

kms

(up &

covered in

trip / day

tonnes km

down)

km per day

in tonnes

4
2
3

128
160
180
468

6
9
8

1
2
3
Total

16
40
30

Total kilometre travelled by three trucks in one year

(468 km. 24 days 12 months) = 1,34,784
Total effective tonneskilometre of load carried by three trucks during one year
(1,824 tonnes km. 24 days 12 months) = 5,25,312
2. Fixed and variable component of maintenance cost:
Variable maintenance cost per km
= Difference in maintenanc e cost/ Difference in distance travelled
=( 46050-45175)/(160200kms-156700kms)
= 0.25
Fixed maintenance cost = Total maintenance costVariable maintenance cost
= ` 46,050 1,60,200 kms 0.25
= 6000

Truck Ownership Cost Calculator

26

384
720
720
1824

Vehicle Cost

45,000

Stamp Duty

1,500

Deposit

Loan Amount

Loan Period

5.00

Interest Rate (Effective)

10.00%

Residual

40%

Monthly Account Fee

5.00

Total Repayments

$59,579.25

(Dependont on Vehicle Cost - Rate varies between States)

Total Interest Paid

Loan

(Years)

Period

$12,779.25

(in

60.0

months)
Flat

(Annual)

Annual

Interest

3.30%

Rate
Residual (Balloon)

$18,600.00

Monthly Repayment (in arrears)

Average
Weekly

$752.79
$173.72

Repayment
(Caution Note: Some loan periods may require a final repayment to complete the principle balance.)
Finance Calculator Above (Interest Calculated Monthly - Excludes finance fees and charges)
Fuel Cost

1.50

$ per Litre

Fuel Consumption

12.00

Kilometers per Week

350

Insurance Costs

1,100.00

Registration

620.00

Service Cost

420.00

Service Interval

15,000

Km

Cost per Tyre

180.00

Tyre Life

55,000

Km

Litres

per

100

kilometers
Kilometers

27

Distance Travelled per

Year

Km

Finance Amortization Calculator

(Interest Calculated Monthly - Excludes finance fees / charges)
Vehicle Cost

60,000

Stamp Duty

Deposit

Loan Amount

Total Repayments

76489.36

(Dependont on Vehicle Cost - Rate varies

between States)
Total Interest Paid

28

16489.36

Loan Period
Interest

Rate

5.00

(Years)

Loan Period (in months)

60

10.00%

(Annual)

Flat Annual Interest Rate

5.50%

Residual (Balloon)

0.00

(Effective)
Residual

Monthly Account Fee

0%

0.00

Monthly Repayment (in arrears)

1274.82

Average Weekly Repayment

294.19

(Caution Note: Some loan periods may require a final repayment to complete the principle balance.)

METHOD OF DATA ANALYSIS& INTERPRETATION

The objective of this paper is to ease the planning of new toll projects by providing estimates of
operating costs, and to help us make better informed decisions about the design of the toll
collection system. To do so we use panel data for Norwegian toll companies to estimate average
cost functions. The main results can be summarised as follows. We provide evidence of very
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important unexploited economies of scale. The estimates cost curves are very steep for traffic
levels below the sample mean, and becomes almost entirely flat over a wide range above the
sample mean. A higher share of vehicles using on board units will significantly reduce average
costs. Competitive tendering will significantly reduce average operating costs by as much as 25
%. Our results also suggest that increased number of lanes, higher debt and passenger charging
will increase average operating costs whereas average operating costs are lower for toll cordons
compared with other projects.

CONCLUSION
Regardless of flag, vessel operating costs are a reflection of a global operating environment that
is constantly changing in response to a myriad of social, political, and economic pressures. This
report, and continued consultations
with carriers, are intended to explore the impact of those changes on the operating environment
of the U.S.-flag foreign trade fleet. As the roundtable
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discussions and surveys revealed, carriers reported that the costs of operating under the U.S. flag
place them at a competitive disadvantage for the carriage of commercial cargoes in international
trade.
Based on the unaudited operating cost data provided to the Agency by U.S.-flag carriers, the total
average cost of operating a U.S.-flag vessel in foreign trade is estimated to be 2.7 times higher,
on average, than foreign-flag equivalents. The operating cost data available to the Maritime
Administration, as well as the additional information laid out in this report, allow the Agency to
better understand, monitor and promote the competitiveness of U.S.-flag carriers. The
information will also be used to inform future U.S. maritime policy.

BIBLIOGRAPHY
http://econpapers.repec.org/paper/nstsamfok/6906.htm
http://en.wikipedia.org/wiki/Operating_cost
http://www.slideshare.net/afukhan/operating-costing-mcom-part-1-project
http://www.icaiknowledgegateway.org/littledms/folder1/chapter-8-operating-costing.pdf
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http://www.accountingtools.com/questions-and-answers/what-is-operation-costing.html

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